XAU / USD attempts to score above $ 1,800 in a weaker USD

Update: Gold prices are expected to end the week on a higher note as they remain stable near $ 1,800 so far this Friday. The precious metal hit a high of $ 1,810.47 in Thursday’s US session, following the greenback’s massive selloff against major currencies. The US dollar index (DXY) slipped below 93.50 after disappointing US gross domestic product (GDP), which fell 2% in the third quarter, below market expectations of 2.7%. The negative reading reinforced speculation that other central banks could overtake the Fed in normalizing monetary policy.

On top of that, the latest World Gold Council (WGC) report said demand for gold rose 47% to over 139 tonnes in July-September in India, despite a 7% drop in demand. global. India, being the second largest consumer of gold after China. Gold is seen as a strong hedge against inflation.

Gold (XAU / USD) is looking for new indices after two-day advances, hovering around $ 1,800 early Friday. Even so, the yellow metal remains poised to print a three week run-up at press time.

The bulls refreshed the week’s high the day before after the US dollar fell on third-quarter US GDP figures and the European Central Bank’s (ECB) failed attempt to tame the euro.

That said, the U.S. Dollar Index (DXY) recorded the biggest drop in 12 days on Thursday after third-quarter U.S. GDP fell below 2.7% expected at 2.0%, well below expectations. 6.7% previously. Weaker GDP growth is pushing the Fed to slow down its race to normalize monetary policy. Note that the ECB’s hint of starting to reduce monthly bond purchases and the Pandemic Emergency Purchase Program (PEPP) will end in March has propelled the euro and weighed on the USD. The regional central bank left its monetary policy unchanged, as expected, with a refinancing rate at 0.0% and deposit rates at -0.5%.

While the greenback’s gauge remains lackluster at time of release and supports buyers of gold, the bitter sentiment calls into question the commodity’s bullish momentum. The same could be drawn from hints of the lack of a deal on US President Joe Biden’s $ 1.75 trillion stimulus package. Recently, U.S. House of Representatives Speaker Nancy Pelosi expressed optimism about the passage of infrastructure and social spending, climate bills during the phone call to to postpone the vote on the bill on infrastructure.

To illustrate the mood, the S&P 500 Futures is posting slight losses as 10-year US Treasury yields struggle for a clear direction around 1.568%.

Given risk aversion and the lack of a sell-off in the US dollar, gold may remain under pressure ahead of key US inflation figures. That said, the core personal consumption expenditure (PCE) price index for September is expected to drop to 0.2% from 0.3% previously based on the MoM. The same should add to hopes for a somewhat slower return of easy money by the Fed, which in turn could put further downward pressure on the USD to meet expectations and help gold prices. to detail the last bullish impulse.

Read: Personal Consumption Expenditure Price Index September Snapshot: Transient inflation becomes permanent

Technical analysis

Gold (XAU / USD) remains in the spotlight inside a two week ascending wedge formation under firmer RSI conditions, no overbought.

Although 50-SMA strengthens the support line of the corner around $ 1,788, gold buyers have been repeatedly rejected by the 78.6% Fibonacci retracement (Fibo.) Of the September drop, near of $ 1,810.

Even if the quote manages to break through the hurdle of $ 1,810, the upper line of the indicated corner, near $ 1,814, the previous month’s high of $ 1,834 will be difficult for gold bulls to break.

On the contrary, a bearish breakout of the confluence of the $ 1,788 support will confirm the bearish chart pattern and may target the September low of $ 1,721. During the fall, $ 1,770 and $ 1,745 may offer several supports to test gold sellers.

Overall, gold remains on a bullish path, but the bulls have a bumpy path ahead of them.

Gold: four hour graph

Trend: further increase expected

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