VOT Research Desk
After a sharp decline on Monday, the price of gold is attempting a lukewarm recovery in anticipation of a turnaround Tuesday.
In a risk-friendly market climate and with negative US Treasury bond yields, the United States Dollar (USD) maintains its recent comeback advances. On Monday, the US dollar recovered some of its early losses.
After the US ISM Services PMI and Factory Orders data exceeded expectations and rekindled prospects for additional tightening by the US Federal Reserve, it staged a startling rebound (Fed).
As a result, the price of gold dropped from multi-month highs of $1,810 to conclude the day at the lower end of the range near $1,766.
The ISM reported that its Manufacturing Purchasing Managers Index (PMI) increased to 56.5 in December from a level of 54.4 in November. Economists were anticipating a decline to 53.1.
Against predictions of 0.7%, US factory orders increased 1.0% in October after increasing 0.3% in September.
The US Dollar rose as a result of Monday’s strong figures, which were combined with the most recent US Nonfarm Payrolls report to reinforce the Federal Reserve’s aggressive rate hike outlook.
According to data released on Friday by the US Bureau of Labor Statistics (BLS), nonfarm payrolls climbed by 263,000 in November rather than the 200,000 predicted.
As of this writing, the US Dollar Index is consolidating its recovery from around the 104.10 area and is remaining stable at 105.30. The benchmark 10-year Treasury yields in the US are currently trading at around 3.58%, with just slight daily losses.
The attraction of the non-interest-bearing gold price wanes due to hawkish Federal policy.
Gold Technical Analysis:
Gold price yielded a negative break from a rising wedge formation on Monday as it closed below the rising trendline support at $1,797 on a four-hourly candlestick closing basis. The tide had turned against gold buyers. The bullish 21-Simple Moving Average (SMA), currently at $1,789, was destroyed by the sell-off, but gold enthusiasts were saved by the horizontal 50SMA at $1,769 at the time.
There may be more room for the downside in the near term, according to the Relative Strength Index (RSI), which is still flatlining below the 50.00 mark. Sellers may challenge the 100SMA at $1,764 if the 50-SMA support fails.
The resistance level for the bears will be the rising (dashed) trendline support at $1,757.
A sustained break below the latter could start a new downswing in the direction of the pattern’s estimated target. at $1,732.
The rebound may see legs toward the 21SMA support-turned-resistance if the 50-SMA cushion holds the line. The $1,800 round number will once again be on purchasers’ minds as prices rise.
