November 30, 2023

XAU/USD drops to test critical 100-DMA support amid firmer yields

  • Gold price keeps falling as the DXY rises with yields amid hawkish Fed.
  • Focus shifts to the US ISM Services PMI and Friday’s NFP release.
  • A break below 100-DMA will drive gold towards $1,785 levels.

Gold price is losing another $20 in Thursday’s trading so far, heavily sold-off into the rally in the US Treasury yields across the curve. The benchmark 10-year yields sit above the key 1.70% mark

The FOMC minutes on Wednesday delivered a hawkish surprise after it showed that the Fed policymakers discussed the beginning of a reduction in the overall asset holdings this year. The Fed minutes also revealed that the officials are prepared for earlier and faster rate hikes to combat elevated inflation.

The hawkish Fed outlook boosted the yields, in turn, lifting the demand for the US dollar across the board. The greenback also remains underpinned by the risk-off market profile, as investors fret about aggressive Fed’s tightening expectations and the coronavirus contagion.

It’s a win-win situation for the US dollar, which is likely to weigh on the USD-sensitive gold price. Bears could likely retain control ahead of the critical US economic releases, with the ISM Services PMI due for release on Thursday while Friday sees the Nonfarm Payroll report. Also, of note remains the speech from the St. Louis Fed President James Bullard for fresh cues on the central bank’s policy normalization plans.

Gold Price Chart – Technical outlook

Gold: Daily chart

Gold’s daily chart shows that the latest leg down has taken out all the major Daily Moving Averages (DMA) support levels, as bears now attack the 100-DMA at $1,793.

A sharp sell-off is expected on a firm break below the latter, opening floors for a test of the December 29 low of $1,789.

The next downside target is seen at the December 21 low of $1,785. That will emerge as a powerful support for gold bulls.

The 14-day Relative Strength Index (RSI) has pierced the midline for the downside, pointing to more losses going forward.

Meanwhile, any recovery attempts will face a strong supply at $1,800, where the 21 and 200-DMAs converge.

Further up, bulls will retest the 50-DMA support-turned-resistance at $1,805. Daily highs of $1,812 will guard the additional upside.

Gold: Additional technical levels to consider


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