Gold price is in a state of flux, approaching the $1,930 mark, after finding renewed interest around the $1,915 range. Despite mixed market sentiment and rising US Treasury bond yields, gold price is making gains, riding on the coattails of a weakening United States Dollar (USD).
Gold Shines as US Dollar Faces Headwinds With the spotlight on the crucial US Consumer Price Index (CPI) inflation data this week, investors are proceeding with caution, drawing cues from a relatively flat close on Wall Street last Friday. The resurgence of Apple Inc. was offset by lackluster performances from Nvidia Corp. and Tesla Inc., leading to a lackluster end to the week.
As Monday’s trading unfolds, risk sentiment remains tepid, influenced in part by surprisingly hawkish remarks from Bank of Japan (BoJ) Governor Kazuo Ueda over the weekend. However, the safe-haven US Dollar isn’t finding much favor despite the cautious market mood, as it grapples with significant losses against the Japanese Yen (JPY) in a big figure sell-off. Ueda’s weekend statement that the central bank is now focused on “a quiet exit” from ultra-loose monetary policy sent the Japanese Yen soaring.
Moreover, the US Dollar remains unresponsive to rising US Treasury bond yields, spurred by optimism about a smooth landing for the US economy. US Treasury Secretary Janet Yellen expressed growing confidence in a soft landing for the US economy while returning from the G20 Summit on Sunday.
Gold price is benefiting from a widespread decline in the US Dollar early on Monday, rebounding from recent lows near $1,915. However, further upward momentum for Gold prices may be hindered by rising US Treasury bond yields. Additionally, China’s subdued Consumer Price Index (CPI) and factory gate deflation could make Gold buyers cautious. China’s CPI increased by 0.1% in August compared to the previous year, marking a slight reversal from a 0.3% decline in July, according to data released by the National Bureau of Statistics (NBS) on Saturday.
Throughout the day, Gold price movements will be closely tied to risk sentiment and US Dollar dynamics. The US economic calendar remains devoid of significant data at the start of the week, as the US Federal Reserve (Fed) has entered its ‘blackout period’ ahead of next week’s policy meeting.
From a short-term technical perspective, Gold price is likely to remain range-bound between the horizontal 21- and 50-daily Moving Averages (DMA), situated at $1,916 and $1,932, respectively, as the US CPI event approaches.
The 14-day Relative Strength Index (RSI) is showing signs of improvement but remains just below the midline, having breached it last Friday.
Hence, the risks seem tilted towards the downside for Gold price. However, Gold sellers will need to break below the 21 DMA support at $1,916 on a daily closing basis to test the $1,900 threshold, below which a decline to $1,885 becomes probable.
On the flip side, immediate resistance can be found at the 50 DMA of $1,932, and if surpassed, the 100 DMA obstacle at $1,950 will come into play.
Gold buyers may have their sights set on the static resistance of $1,970, followed by the high from July 27 at $1,982.