Gold Price Analysis: XAU/USD clings to gains near two-week tops, around $1,745-46 hurdle

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  • A softer tone around the USD assisted gold to regain positive traction on Thursday.
  • The risk-on mood, uptick in the US bond yields might cap any meaningful upside.
  • A sustained move beyond the $1,745-46 hurdle is needed to confirm a bullish bias.

Gold refreshed intraday tops during the early European session, with bulls making a fresh attempt to clear a strong barrier near the $1,745-46 region.

Following the previous day’s modest pullback, the precious metal managed to regain some positive traction on Thursday. The US dollar struggled to capitalize on the previous day’s modest bounce from over two-week lows, instead edged lower during the first half of the trading action on Thursday. This, in turn, was seen as a key factor that provided a modest lift to the dollar-denominated commodity.

That said, a combination of factors kept a lid on any strong follow-through gains for the XAU/USD, at least for now. The underlying bullish sentiment in the financial markets could hold bullish traders from placing any aggressive bets around the safe-haven commodity. This, along with a modest uptick in the US Treasury bond yields, might further collaborate to cap the non-yielding yellow metal.

Minutes from the latest FOMC meeting held on March 16-17 revealed that policymakers remained cautious about the continuing risks stemming from the pandemic. The Fed reiterated its commitment to extending monetary policy support until the recovery was more secure. Investors, however, seem convinced that a stronger economic recovery would force the Fed to raise interest rates sooner than anticipated.

The optimistic outlook for a relatively faster US economic recovery from the pandemic remained well supported by the impressive pace of coronavirus vaccinations. This, along with US President Joe Biden’s infrastructure spending plan, has been fueling speculations about an uptick in US inflation. This further raised doubts that the Fed will retain ultra-low interest rates for a longer period.

This, in turn, pushed bond yields higher, which along with the upbeat US economic outlook should help limit any meaningful USD corrective slide. Even from a technical perspective, the commodity’s inability to break through the $1,745-46 supply zone makes it prudent to wait for some strong follow-through buying before positioning for an extension of the recent bounce from multi-month lows.

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