The gold price is staying above the important daily support line at $1,940 early Tuesday. As the US Dollar (USD) feels the pull of gravity with decreasing US Treasury bond yields. And chances of a US debt agreement passing on Wednesday.
Will the huge decline in the US dollar help gold bulls?
With full markets reopening on Tuesday. The US Dollar is losing momentum in expectation of a good reaction to the optimism around the US debt agreement. The United States government Bond and stock futures plainly reflect the market’s assumption. That the debt agreement would be passed by Congress on Wednesday to avoid a default.
The White House and Republican congressional leaders have increased their lobbying in favor of the agreement. Which has kept risk sentiment steady thus far. The US Dollar Index is now beginning its decline towards the 104.00 level. Despite a 1.70% drop in the benchmark 10-year US Treasury bond rates. Prompting the gold price to defend the crucial support around $1,937.
Gold is wandering at two-month lows of $1,937, looking exposed to more downside risks should risk-on trade acquire traction and amplify the US Dollar’s recent slide. Despite the fact that the US Dollar is projected to fall, likely stay restricted, despite increased betting on a 25 basis point (bps) rate hike by the US Federal Reserve (Fed) in June, backed by good US economic data and a hawkish perspective on interest rates by Fed officials in recent days.
The market’s price for a 25-basis point Fed rate rise in June is presently at 57%, down from 62% on Monday but far higher than the 15% probability observed a week ago. According to Reuters, the president of the Federal Reserve Bank of Minneapolis stated on Monday, “I think if I had to err, I would err on being a little bit too aggressive in terms of bringing inflation down.”
With concerns about a US debt, With that out of the way, the focus shifts to the United States’ economic data releases. The top-tier US Conference Board Consumer Confidence statistics will be released on Tuesday. Meanwhile, gold dealers will be watching events surrounding the US debt accord and Fed comments for new trading directions.
Technical analysis of the gold.
The gold price’s short-term technical picture remains unaltered, as bears continue to test the bullish commitments at the slightly bullish 100-daily moving average (DMA) around $1,937.
The 14-day Relative Strength Index (RSI) remains below the midpoint, indicating a negative bias for the gold market. Furthermore, gold sellers are searching for confirmation of a Bear Cross, as the 21 DMA attempts to penetrate the 50 DMA from above.
Daily To restart the decline towards the March 17 low of $1,918, the price must close below the 100 DMA support. Following that, deeper drops might put the $1,900 round number in jeopardy.
Any rehabilitation efforts, on the other hand, will need acceptance over the $1,950 psychological limit. Gold bulls will then seize control and aim for Friday’s high of $1,957.
If the recovery maintains pace, the $1,970 static barrier might be a tough nut to break for Gold buyers.
