On the final trading day of the week, gold is maintaining its recent rally at the $2,000 level. The US Dollar (USD) is holding to recovery gains amid risk aversion, fueled by a sell-off in US technology and increased US-China tensions over Taiwan. The tech-heavy Nasdaq 100 fell on Thursday, with Tesla Inc. falling almost 10% as creator Elon Musk signaled that the company will continue to lower prices to stimulate demand.
The S&P 500 index dipped ahead of the expiration of options on Friday. Meanwhile, China’s military has stated that it intends to conduct at least five manoeuvres in various places, including waterways off its coast and the South China Sea. This comes at a time when relations between Taiwan and the United States are already seething. Risk appetite has been further eroded as investors analyses the future for US Federal Reserve (Fed) interest rates.
The US dollar fell along with US Treasury bond rates on Thursday, as traders reduced Fed rate rise expectations in response to lower US jobless claims and regional manufacturing data. Policy-sensitive two-year Treasury bond rates are down two basis points to 4.13% at the time of writing, following falling 10 basis points on Thursday.
Meanwhile, 10-year Treasury bond rates have fallen 0.50% on the day to 3.53%. basis points (bps) = 25 The Fed’s rate hike in May is practically certain, but the odds of a halt in June have risen to 65%, dragging on the Greenback.
The choppy US Dollar price movement makes gold susceptible in the face of aggressive Fed talk.
A combination of hawkish comments from numerous Fed members and a risk-off market mood did assist the safe-haven US Dollar in staging a late return. However, the dip in US Treasury bond rates allowed gold bulls to maintain their rally.
Looking forward, all eyes will be on the eurozone and the US S&P Global Manufacturing and Services preliminary PMI data, which might give new insights on the status of the global economy, influencing risk sentiment and US Dollar values. In April, the S&P Global Manufacturing and Services PMIs in the United States fell to 49.0 and 51.5, respectively. Weak data might bolster Fed rate drop forecasts, harming the US dollar. However, economic concerns will reemerge, maintaining the US Dollar’s safe-haven demand.
Gold(XAUUSD) Technical Outlook
With a rising wedge pattern in action, gold bears are looking for a daily candlestick to close below the bullish 21-Daily Moving Average (DMA) at $1,996 to unleash further downside.
The 14-day Relative Strength Index (RSI) remains over the midline, indicating caution for gold bears.
As long as the 21 DMA support holds, the gold price may continue to see dip-buying transactions. To break the corrective downtrend and resume the upswing towards the static barrier at $2,015 and the $2,020 round figure, gold must maintain a sustained rise above the wedge support-turned-resistance at $2,012.
If the 21 DMA support fails, Wednesday’s low of $1,969 will be endangered, and gold sellers will attempt to break through 1,950, the junction of the important psychological level and the April low.
