In four out of the past five trading days, XAUUSD has closed lower from where it opened. The precious metal has succumbed to dollar strength with XAUUSD currently trading below its 100 SMA. In fact, when it closed at $1,457.28 on Friday, it marked its biggest weekly decline since November 2016.
One of the reasons for the lackluster demand in gold is the rising yields in 10-year US Treasury bond yields. Last week, yields surged to their 3-month highs to 1.930% per annum on reports from Beijing that the US would implement rollbacks to its tariffs on Chinese goods. The optimism on this news also spilled over to the equities markets with S&P500, Nasdaq, and Dow Jones all closing at record highs on Friday.
Higher returns on government bonds and equities in turn sparked demand for the US dollar.
Gold Daily chart
Technical Analysis for XAUUSD
On the daily chart, XAUUSD is trading around its September lows and below the 100 SMA at around $1,460.00. Gold is finding some support at this level presumably on renewed concerns about the US-China trade deal. Over the weekend, US President Donald Trump clarified that he has not agreed to any deal with China. This news sparked a bit of risk aversion and propped up gold early into Monday’s trading.
Today is Veteran’s Day and without any economic reports scheduled from the US (the only major event for today is the UK Q3 GDP report), direction on XAUUSD will likely be dictated by market sentiment surrounding the US-China trade war.
Zooming into the 4-hour chart, the sharp decline on XAUUSD could be followed by a pullback . There is potential resistance at $1,480.18 where the pair previously found support in October and also coincides with the 38.2% Fibonacci retracement level using the high of November 1 and Friday’s low. If risk aversion dominates this week’s trading, it won’t be surprising to see XAUUSD go beyond these Fib levels. However, more clarity on the trade deal may lead to risk appetite and gold could continue trading lower to its 200 SMA on the daily chart around $1,390.00