U.S. Treasury yields made a small correction from 16-year highs. So, US Dollar (USD) bulls took a breather. In this pressure environment, the gold price fell to its lowest level in five weeks on Wednesday.
Gold price struggles to find a base
Mixed market sentiment prevails in Asia. Additionally, there is relative stability in the bond market. In this environment, long-term US Treasury bond yields have retreated from recent years’ peaks. This caused DXY to enter a consolidation phase near 10-month highs. Benchmark 10-year U.S. Treasury yields first rose to 4.5660%, a 16-year high. It then experienced a decline of 4 basis points (bps). This helps the gold price find a base on Wednesday.
The US bond market faced headwinds at the beginning of the week. The US treasury auctions to be held this week and the fear of a US government shutdown played a role in this. Reuters reported earlier in the day that the U.S. House of Representatives passed a procedural hurdle on Tuesday for a bill to fund parts of the federal government. He also noted that it provides some relief to bond markets.
It is possible that this situation supports gold
The gold price may also find support from record high premiums in the Chinese physical bullion market. According to Bloomberg, the gold bullion market in China has risen this month. It has also reached a record premium of over $100 over international prices at times. However, the average of the last ten years was below 6 dollars. Meanwhile. China’s gold imports via Hong Kong recovered in August compared to the previous month. It is possible that this is a supporting factor for the gold price.
Fed insists on ‘higher for longer’ view
On Tuesday, investors weighed higher borrowing costs and their impact on global economic growth. US Dollar bulls found additional strength from risk aversion. cryptokoin.comAs you follow from , Minneapolis Fed President Neel Kashkari made a statement saying, “US interest rates probably need to rise a little more and be kept there longer to cool things down.” Additionally, some Fed policymakers have expressed support for the ‘higher for longer’ interest rate view. Meanwhile, the Dollar rebounded from moderately mixed economic data releases from the US.
Attention will now be on US Durable Goods Orders data and the Fed’s statements. Investors will watch these developments for a new momentum in the gold price. However, developments in the US bond markets will continue to be the main driver for gold going forward.
Gold price technical analysis: Death cross confirmed
The precious metal fell below $1,900 on Wednesday, after selling for a third day. The gold price was rejected again at the critical support-resistance point where the 21 and 200 Day Moving Averages (DMA) intersect, then at $1,926. He confirmed the ‘death cross’ the day before. Downside movement is easier as the 50 DMA breaks below the 200 DMA.
Additionally, the 14-day Relative Strength Index (RSI) indicator is trending below the 50 level. This justifies the potential for a decline in the gold price. However, given that the gold price fell sharply at the beginning of the week, a dead cat bounce cannot be ruled out.
If gold sellers find a strong foothold below the $1,900 support, a fresh sell towards the August 21 low at $1,885 will be on the cards. The next downside target lies at the static support at $1,970. On the upside, a sustained break above the combination of critical moving averages (21, 50, and 200) hanging around $1,927 is needed to challenge the downward-sloping 100 DMA at $1,938. Further up, the $1,950 psychological level will be a tough nut to crack for gold optimists.
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