Gold trading alert: U.S. stocks weakness pushed up the appeal of the dollar, gold prices or test the 21-day average support?

By    11 Dec,2022

Spot gold shocks slightly up, currently trading near the 1773 mark, although overnight U.S. stocks continued to weaken, increasing the dollar's safe-haven demand, so that gold prices rebounded blocked near the 1780 mark, but the U.S. bond yields fell back, helping gold prices temporarily held above the 10-day SMA 1767.8. No heavy economic data out this trading day, traders have turned their attention to the U.S. CPI data for November and the Federal Reserve interest rate resolution to be released next week.


Click on the image to open it in a new window Gold is still pegged to the dollar, and there was fresh buying when the dollar weakened," said Ole Hansen, head of commodities strategy at Saxo Bank.

In addition, considering that gold prices fell only about 2% on Monday, when strong U.S. data (ISM), ETF positions decreased, the gold market still has some potential downside". On Monday, better-than-expected U.S. services data took investors by surprise, raising concerns that the Federal Reserve may stick to its aggressive stance on rate hikes for longer.

That led to a pullback in gold prices from a five-month high, closing down 1.6%, and the dollar rallied in response to the data. Further rebound opportunities, focus on the 21-day SMA near 106.50 resistance, which is not good for gold prices.

But still need to remain vigilant before the dollar index topped the 200-day SMA. This is because if the dollar index returns to a downtrend, this will give gold prices the opportunity to resume their upward trend, although the likelihood of this is relatively low.

Marc Chandler, chief market strategist at Bannockburn Global Forex, said there is not a lot of new excitement and the market is big on Monday, but the biggest focus is on next week's Fed meeting. The dollar may benefit from bearish sentiment in the stock market, and the dollar "tends to benefit from a risk averse environment. All three major U.S. stock indexes closed sharply lower on Tuesday, with the S&P 500 closing lower for the fourth straight session.

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In U.S. bond yields, the U.S. 10-year Treasury yield fell 2.39% on Tuesday, essentially giving back all of Monday's gains to close at 3.513%, which provided some support to gold prices. The focus below is on support near the 100-day SMA at 3.468%. A break below that support would add a bearish signal in the medium term, with a bias in favor of gold prices. The yield is generally viewed as a risk-free rate of return and an opportunity cost reference for holding gold.

The U.S. 10-year Treasury yield has fallen nearly 80 basis points since hitting a 15-year high on Oct. 21.