XAU/USD falls back towards 200-DMA as bears attack $1,850 on USD rebound

  • Gold accepts offers to renew the daily low as DXY bounces off the monthly low.
  • The U.S. dollar tracks the rally in yields ahead of the Biden-Powell meeting.
  • Market sentiment remains firmer amid easing bets on aggressive Fed rate hikes and China unblocking.
  • Gold Price Prediction: Where Can It Go From Here?

The price of gold (XAU/USD) extends the pullback from the start of the week against the monthly resistance line in Tuesday’s mid-Asian session. In doing so, the precious metal drops to $1,850, a refreshing intraday low, at press time.

The latest weakness in the commodity could be tied to the rebound in the US Dollar from a month-long low as full markets return to the table. That said, the US Dollar Index (DXY) is starting a three-day downtrend around a five-week low, rallying offers to 101.56 at the latest, as bond yields pare recent losses.

US 10-year Treasury yields begin the week’s trading nearly six basis points (bps) higher as they break through the 2.8% mark. Even so, “bonds in nearly every corner of the $63 trillion global debt market are rebounding as investors begin to see value in fixed-income assets again,” Bloomberg said. The reason for the latest bond sale could be related to market consolidation during month-end moves.

It should be noted that market sentiment remains firmer as S&P 500 futures rise 0.50% later in the day, which in turn probes the rebound in the US Dollar. However, traders need validation of the latest risk trend and therefore the recent drop in gold prices seems illusory.

Looking ahead, headlines from the Eurogroup meeting, the Chicago Purchasing Managers’ Index and the Dallas Fed’s Manufacturing Index for May could steer gold traders.

Technical analysis

Gold prices extend the pullback from the monthly resistance line around $1,861 at press time, as sellers aim to retest the 200-DMA support near $1,840.

Given the stable signals from the RSI and the bullish MACD, the price of gold could print another bounce from the indicated key moving average, failure to do so could lead the XAU/USD towards the $1,800 threshold .

However, the yearly horizontal support zone near $1,787-85 looks like a tough problem for gold sellers to solve going forward.

On the contrary, buyers need to break through the monthly resistance line near $1,861 on the daily close to regain control.

Even so, a 61.8% Fibonacci retracement (Fibo.) from December 2021 to March 2022 on the upside near $1,875 could test the bulls.

Overall, gold prices should see further selling, but the decline seems limited.

Gold: daily chart

Trend: further weakness expected