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XAU / USD could rise after RBNZ as Fedspeak remains accommodating

By on May 26, 2021 0

Gold, XAU / USD, Treasuries, Fed, Consumer Confidence, RBNZ, Technical Analysis – Talking Points:

  • Gold prices extended April’s rebound as Treasury yields declined
  • RBNZ appears to be fueling USD weakness, pushing XAU / USD higher
  • Gold could rise towards 61.8% Fibonacci retracement level

Anti-fiat gold prices have risen over the past 24 hours, capitalizing on a combination of lower long-term Treasury rates, a weaker US dollar and a drop in Bitcoin. There has been a growing interest in the yellow metal increasingly inverse relationship with the latter. But, it seems the focus for XAU / USD on Tuesday was mostly US economic data and Fedspeak.

A worse-than-expected consumer confidence report dampened Fed expectations further. Vice President Richard Clarida also spoke to Yahoo Finance, speaking about inflation. He noted that although concerns about the rise in the CPI have increased, the central bank continues to view these forces as transitory. There was also strong demand at a 2-year treasury bill auction, which resulted in lower yields.

The unpaid yellow metal tends to thrive in an environment where returns on cash or fixed income investments are depressed. Gold’s ascent since April has come alongside the decrease in bets on the Fed’s rate hike in 2022. It also means that a key risk for XAU / USD futures is when the central bank starts. inevitably to push for a reduction in monthly asset purchases and an increase in rates.

For now, gold may rise. The yellow metal rose in Wednesday’s Asia-Pacific trading session, benefiting from further weakness in the US dollar. This appeared to be due to the RBNZ rate decision, where signs of a rate hike next year increased demand for the New Zealand dollar at the expense of the greenback. The Fed’s dovish comments could keep gold momentum going through the Wall Street session, check out DailyFX Economic Calendar for when the speakers are configured to cross wires.

Technical analysis of gold

Gold confirmed the breakout above the key resistance area from 1863 to 1875, exposing the 61.8% Fibonacci retracement level to 1923 on the daily chart below. Guiding XAU / USD higher appears to increase support from March as prices broke the August downtrend line. Removing the 61.8% level would subsequently expose the 1949-1965 resistance zone from November and December.

XAU / USD daily chart

Chart created using TradingView

– Written by Daniel Dubrovniksky, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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