Gold (XAU/USD) stays defensive at around $1,800 after printing the
biggest daily losses since November 22. That said, the yellow metal
seesaws near the short-term support line amid a lack of fresh catalysts
during the early Asian session on Tuesday.
Firmer US Treasury bond yields drowned commodities and propelled
the US Dollar Index (DXY) the previous day. Even so, equities had a nice
start in 2022.
That said, the DXY rose around 0.60% daily, around 96.00 at the
latest, rising the most since mid-December on Monday. On the other hand,
the US Treasury yields jumped to the six-week top for 30-year, 20-year,
10-year and 5-year notes.
The worsening coronavirus conditions raise challenges for the
market sentiment and policymakers who previously expected the South
African covid variant, namely Omicron, to be less severe than the
previous virus variant. The risk-off mood also takes clues
from the rising hopes of faster Fed rate-hikes in 2022. Both these
catalysts weigh bond prices and fuel yields.
“COVID worries have been front and center once again for investors
since the start of the holiday season. The number of new COVID-19 cases
has doubled in the last seven days to an average of 418,000 a day,
mostly attributed to the highly transmissible
but milder Omicron variant,” according to a Reuters tally.
The US inflation expectations, as per the 10-Year Breakeven
Inflation Rate numbers from the Federal Reserve Bank of St. Louis
(FRED), jumped to a fresh high in six weeks to portray further prices
pressure ahead, allowing Fed hawks to keep controls.
It’s worth noting that the softer prints of US Markit Manufacturing
PMI for December, final reading failed to have a notable market impact
as gold traders are more interested in today’s US ISM Manufacturing PMI
for the said month, expected 60.2 versus
61.1.
Other than the US PMI, virus updates and Fed chatters will also
direct short-term gold price moves. However, Wednesday’s Federal Open
Market Committee (FOMC) Meeting Minutes and Friday’s US Nonfarm Payrolls
(NFP) will be crucial to watch for clear direction.
Read: ISM Manufacturing PMI Preview: Low expectations in three figures open door to dollar upswing
Technical analysis
Gold’s pullback from 61.8% Fibonacci retracement of (Fibo.) of
November 16 to mid-December downside takes clues from bearish MACD
signals and descending RSI line, not oversold, to keep sellers hopeful.
Even so, an ascending support line from December 15, near the
$1,800 threshold, quickly followed by the 100-SMA level surrounding
$1,797, challenges the gold sellers.
Adding to the downside filter is the monthly horizontal area near
$1,793-91, a break of which should give a free hand to the gold bears
targeting the last monthly low near $1,753.
On the flip side, a convergence of weekly resistance line and tops
marked in July, as well as in September, restricts short-term recovery
moves of gold, in addition to the 61.8% Fibo. level surrounding $1,830.
Following that, a run-up towards $1,850 and $1,870 can’t be ruled out before directing gold buyers to November’s peak of $1,877.
