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Gold - XAU/USD Chart

Gold Slips to $1,806, Upward Trendline Support at $1,797- Brace for a Buy Trade

Posted Tuesday, January 4, 2022 by
Arslan Butt • 2 min read
  • The Fed is expected to release the minutes of its December monetary policy meeting soon
  • Gold rebounds above $1,800, following a bullish reversal, after getting rejected at the $1,797 support
  • Gold fell the furthest in six weeks, due to the strengthening of the dollar and higher yields, as investors braced for tightening of the monetary policy in 2022
Gold closed at $1,804.05, after setting a high of $1,832.50, and a low of $1,802.95. Gold started the New Year with a sharp decline, losing all of its gains of the previous two session on Monday, amid rallying equities and higher bond yields. On Monday, the US Treasury yield surged on the benchmark 10-year note, reaching 1.64%, which is its highest level since November 24, 2021.

Gold Rate Live

 

XAU/USD
Rising bond yields increased the opportunity cost of holding non-interest-yielding precious metals, and weighed on their prices. The US Dollar Index, which measures the value of the greenback against a basket of six major currencies, was also very high on Monday, reaching a level of 96.33. The strength of the US dollar added to the bearish pressure on the yellow metal, dragging its prices lower on the first trading day of 2022.Gold fell the furthest in six weeks, due to the strengthening of the dollar and higher yields, as investors braced for tightening of the monetary policy in 2022. The surge in Treasury yields came after confidence in the long-term outlook for economic recovery in the US increased, despite the ongoing risks presented by the Omicron variant of the coronavirus. US Treasury yields rose by 12 basis points on Monday – the biggest first-day jump since 2009. This means the Ten-Year Bond Yield had its best start to a year in more than a decade, which ultimately weighed heavily on the gold prices, as the two share a negative correlation. Another factor driving the strength of yields and the greenback was rising expectations of Federal Reserve rate hikes to combat inflation.

The Fed is expected to release the minutes of its December monetary policy meeting soon. The minutes will reveal the expedited timetable for ending the pandemic era stimulus. The central bank has said it could raise interest rates three times in 2022. However, that will depend on keeping inflation at 2% a year, and unemployment at the ideal level of around 4%, which is a gauge for full employment. Rate hike reports always have a negative impact on gold prices; however, if inflation persists and remains strong throughout 2022, gold could rebound and even retrace the record highs of 2020, above $2,100. On the data front, at 19:45 GMT, the final manufacturing PMI came in, remaining flat at 57.7. At 20:00 GMT, the construction spending figures for the US were released, showing a drop by 0.4% in November, compared to the expected 0.8%, and weighing on the US dollar, which led to a further decline in the gold prices on Monday.

Gold - XAU/USD Chart
Daily Technical Levels

Support                 Resistance
1,790.76                1,824.91
1,777.48                1,845.78
1,756.61                1,859.06
Pivot Point:         1,811.63

Gold (XAU/USD) technical Outlook; Upward trendline to support at $1,797

Gold has rebounded to just above $1,800, following a bullish reversal, after getting rejected at the $1,797 support. Below this, the next support can be found at around 1,790, which is being prolonged by the double bottom level. The closing of candles above the support level of 1,797 suggests the chances of an uptrend in gold.

A bullish break beyond the 1,807 level would expose gold to 1,819. The next resistance level is at 1,832, or even lower. There appears to be a bearish bias below 1,807 and vice versa.

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