Gold (XAU/USD) rebounds and gains over 2% on Monday as crude prices drift lower, dragging the US Dollar (USD) lower due to its positive correlation, as elevated energy prices exert pressure on inflation. XAU/USD trades at $3,954 at the time of writing.
XAU/USD surges as falling energy prices and Treasury yields revive bullion demand
Oil prices are collapsing amid growing speculation for a diplomatic exit from the US-Iran conflict. Reports say that Iran’s supreme leader granted “certain authorities” regarding peace talks to President Masoud Pezeshkian. News that US President Donald Trump wants a peaceful resolution improved risk appetite, a headwind for the Greenback, which usually fares well amid high interest-rate scenarios and on its safe-haven appeal.
The US Dollar Index (DXY), which measures the buck’s performance against six currencies, is down 0.27% at 101.68. US Treasury yields also edged lower, with the 10-year yield losing nearly 6 basis points to 4.871%.
In the US, the Institute for Supply Management (ISM) Purchasing Managers’ Index (PMI) improved from 54.5 to 55.5 in October, exceeding forecasts of 54.6. The report showed that the Prices Paid sub-component fell from 77.9 to 75.2, while an employment measure cooled during the month.
Even though business activity reached its second-highest reading in more than four years, an indication that the economy is expanding solidly, traders trimmed hawkish bets from a week ago. Money markets see a 75% chance of a rate hike in December, down from 80% a week ago, according to the CME FedWatch Tool.
What is on the US calendar
Traders' focus is on Tuesday’s US midterm elections, Factory Orders, the Job Openings and Labor Turnover Survey (JOLTS) and speeches by Federal Reserve officials.
XAU/USD technical outlook: Recovery incomplete, but reclaims $3,900
Despite bouncing off yearly lows, Gold’s trend remains up, even though the Relative Strength Index (RSI) shows buyers are gaining momentum. The XAU/USD pair bounced from below $3,900 to current spot prices, but it remains below the latest cycle low at $3,975, the October 23 low of the day (LOD), which has turned into resistance.
To complete a bullish reversal, buyers must surpass the October 23 LOD followed by the $4,000 psychological level. A breach of the latter will see Gold face a key resistance trendline near $4,050-$4,070, ahead of $4,100.
For a bearish continuation, Gold needs to fall below $3,900. This will expose the October 30 yearly low of $3,870, followed by the April 22, 2025, daily high, turned into support at $3,500.
Comments
Log in or sign up to join the conversation.