Gold is trading near 4,360 USD per ounce on Friday after gaining almost 2% in the previous session. The precious metal has found support from falling oil prices, which have helped ease inflation concerns and pushed bond yields lower.
Oil prices have declined for a third consecutive session as Saudi Arabia works to restore supplies through the East-West pipeline. Markets are also focusing on Donald Trump’s meeting with Gulf leaders scheduled for next week.
US Treasury yields have also retreated from multi-year highs. The yield on the 10-year Treasury fell to 4.93% after briefly moving above 5% earlier this week.
Meanwhile, investors continue to assess the outlook for Federal Reserve policy following its first interest rate increase in three years. The Fed has signalled that further tightening may be necessary to bring inflation under control.
Markets currently estimate the probability of another rate increase as early as October at around 53%. This remains a risk factor for gold, although lower oil prices and falling Treasury yields are providing temporary support.
XAU/USD Technical Analysis
On the H4 XAU/USD chart, the market formed a consolidation range around 4,304. A downward move towards 4,234 and a subsequent rebound towards 4,381 have now been completed.
Today, a new downward move is developing towards 4,333. A break below this level could open the way for the bearish trend to continue towards 4,215.
The MACD indicator supports continued short-term downward momentum. Its signal line remains below zero and points firmly downward.
On the H1 XAU/USD chart, the market broke above 4,305 and moved higher towards 4,335, followed by a decline back to 4,305, testing the level from above. A consolidation range then formed around 4,305.
The market subsequently broke above this range and moved higher towards 4,381. The main scenario now envisages a new decline towards 4,215.
The Stochastic oscillator supports this bearish scenario. Its signal line remains above 80 and is poised to turn lower towards 20 in the short term.
XAU/USD Outlook
Gold is receiving short-term support from falling oil prices and lower US Treasury yields. However, expectations of further Federal Reserve tightening continue to limit the precious metal’s upside potential.
From a technical perspective, the recent rally towards 4,381 appears to have completed the corrective upward move. The main scenario now points to a decline towards 4,333, with a break below this level potentially extending the downward trend towards 4,215.
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