- Gold price bides time before the next push higher, holding steady on Tuesday.
- US Dollar eases with US Treasury bond yield, awaiting key central banks’ policy decisions.
- Upside risks intact for Gold price amid a bullish technical setup on the daily chart.
Gold price is consolidating a three-day uptrend to two-week highs above $1,930 early Tuesday. Gold buyers are gathering pace before the next push higher, underpinned by a broad-based United States Dollar (USD) retreat alongside sluggish US Treasury bond yields.
Gold price gains from multiple catalysts ahead of the Fed
Gold price rallied hard and extended its recovery from three-week troughs of $1,901 on Monday, as the US Dollar pulled back from six-month highs across the board due to a sharp retracement in the US Treasury bond yields across the curve. The benchmark 10-year US Treasury bond yields lost nearly 10 basis points (bps) to reverse from sixteen-year highs of 4.399% to settle at 4.30%, where it now wavers.
The correction in the US Dollar and the US Treasury bond yields could be attributed to a US Federal Reserve (Fed) pause fully baked next week amid market speculation whether the Fed remains on track for a final rate hike by the year-end. Dovish expectations around the Fed are building up, as the most major global central banks such as the European Central Bank (ECB) and the Bank of England (BoE) are nearing the end of their tightening cycles.
The US Dollar also witnessed a fresh bout of selling after the Euro gained on a Reuters report that the ECB policymakers are looking to start discussing how to tackle the multi-trillion-euro pool of excess liquidity sloshing around banks, with raising reserve requirements a potential first move. EUR/USD resumed its rebound to test 1.0700 on the hawkish ECB story.
All in all, Gold price continues to draw support from the pre-Fed decision-led profit-taking in the US Dollar, surging Oil prices and rising physical Gold premiums in China. The recent upsurge in Oil prices rekindles concerns over inflationary pressures, keeping fears over a global recession alive.
Later in the day, Gold price could take cues from the US Housing Starts and Building Permits data, especially after homebuilder sentiment turned negative for the first time in seven months. Builder confidence in the single-family US housing market fell 5 points in September to 45 on the National Association of Home Builders/Wells Fargo Housing Market Index.
Gold price technical analysis: Daily chart
Gold price closed Monday above the all-important 50-Daily Moving Average (DMA) at $1,932, confirming a bullish reversal from three-week lows.
Therefore, the further upside now opens up toward the September high of $1,953 should Gold price manage to take out the mildly bullish 100 DMA at $1,945 on a sustained basis.
The 14-day Relative Strength Index (RSI) indicator is holding well above the 50 level, suggesting that the bullish potential remains intact.
Adding credence to the Gold price optimism, the 21 DMA is set to break above the 200 DMA to validate a Bull Cross.
On the other hand, failure to resist above the 50 DMA barrier at $1,932, Gold sellers will fight back control and target the key support at $$1,922, where the 21 and 200 DMAs meet.
A firm break below the confluence support area will initiate a fresh downtrend toward the $1,900 threshold once again.