Gold, XAU/USD, Treasuries, Fed, Consumer Confidence, RBNZ, Technical Analysis – Talking Points:
- Gold prices extended April’s bounce as Treasury yields declined
- RBNZ seems to be fueling USD weakness, pushing XAU/USD up
- Gold may rise towards the 61.8% Fibonacci retracement level
Anti-fiat gold prices charged higher over the past 24 hours, capitalizing on a combination of falling longer-term Treasury rates, a weaker US Dollar and a drop in Bitcoin. There has been rising interest in the yellow metal’s increasingly inverse relationship with the latter. But, it seems that the focus for XAU/USD on Tuesday was predominantly on US economic data and Fedspeak.
A worse-than-expected consumer confidence report further cooled Fed tapering expectations. Vice Chair Richard Clarida also spoke to Yahoo Finance, talking about inflation. He noted that while there have been rising concerns about elevated CPI, the central bank continues to see these forces as transitory. There was also strong demand at a 2-year Treasury note auction, consequentially pulling yields lower.
The non-interest-bearing yellow metal tends to thrive in an environment where returns on cash or fixed income investments are depressed. Gold’s ascent since April has been occurring alongside fading 2022 Fed rate hike bets. That also means that a key risk for XAU/USD down the road is when the central bank inevitably begins to push for tapering monthly asset purchases and raising rates.
For now, gold may rise. The yellow metal climbed during Wednesday’s Asia-Pacific trading session, capitalizing on more weakness in the US Dollar. This seemed to be due to the RBNZ rate decision, where hints of a rate hike next year increased demand for the New Zealand Dollar at the cost of the Greenback. Dovish commentary from the Fed may keep gold’s momentum going during the Wall Street session, check out the DailyFX Economic Calendar for when speakers are set to cross the wires.
Gold Technical Analysis
Gold confirmed the breakout above the key 1863 – 1875 resistance zone, exposing the 61.8% Fibonacci retracement level at 1923 on the daily chart below. Guiding XAU/USD higher seems to be rising support from March as prices pushed above the falling trendline from August. Taking out the 61.8% level would subsequently expose the 1949 – 1965 resistance zone from November and December.
XAU/USD Daily Chart
–— Written by Daniel Dubrovsky, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter