- Gold prices consolidate recent gains at two-month high.
- Yields, stock futures drop as pre-Fed caution grows after Yellen’s comments.
- US-China news, mixed data fails to underpin buying momentum around yearly resistance line.
- Gold Price Forecast: Bulls looking for a re-test of November high at 1,877.15
Gold (XAU/USD) extends late Thursday’s pullback from a two-month high, refreshes intraday low around $1,838 during Friday’s Asian session. In doing so, the yellow metal bears the burden of the risk-off mood even as the US Treasury yields stay on the back foot.
The metal’s pullback from the year-long resistance line could be linked to the market’s fears over the US Federal Reserve’s (Fed) next moves amid recently mixed data and the policymaker’s readiness to act.
That said, the US Jobless Claims jumped to the highest since late October and the Philadelphia Fed Manufacturing Survey details also improved for January. However, US Treasury Secretary Yellen recently said in the CNBC interview, “Inflation rose by more than most economists, including me, expected and of course, it’s our responsibility with the Fed to address that. And we will.”
While portraying the mood, the US 10-year Treasury yields posted a second consecutive daily loss, down four basis points to 1.79% at the latest, whereas the S&P 500 Future dropped 0.30% intraday by the press time.
It’s worth observing that news from the South China Morning Post (SCMP) relating to the Sino-American ties should have helped the market sentiment but did not. SCMP signaled that China’s Yang Jiechi and US national security adviser Jake Sullivan are up for a crunch meeting but no date was indicated.
The yellow metal poked one-year-old resistance line as the US dollar tracked Treasury yields. However, the recent pre-Fed caution seems to weigh on gold prices, which in turn may continue amid a lack of major data/events and the metal’s failure to cross the key hurdle to the north.
Having crossed a three-week-old resistance line on Wednesday, now support around $1,826, gold retreats from a year-long downward sloping trend line, around $1,850, amid firmer RSI and bullish MACD signals.
Though, $1,850 isn’t the only key to open the door for gold buyers as 61.8% Fibonacci retracement (Fibo.) of January-March 2021 fall, near $1,852, acts as a validation point to the rally targeting late 2021 peak of $1,877.
Following that, the 78.6% Fibo. level surrounding $1,900 and June 2021 peak of $1,916-17 will be in focus.
Alternatively, pullback moves below $1,826 will drag the quote towards the $1,800 threshold but an ascending support line from mid-December, close to $1,798, will test the gold sellers afterward.
Even if the gold prices fall below $1,798, a five-month-old support line close to $1,791-92 will be crucial as a clear break of which won’t hesitate to welcome gold bears.
To sum up, gold buyers approach key resistance that could give buyers a free hand.
Gold: Daily chart
Trend: Further upside expected