(Dhwani Mehta – FXStreet)
– Gold price resumes the uptrend amid a weaker US dollar, risk-recovery.
– Treasury yields falter again amid ongoing US-China tensions.
– XAU/USD bulls regain momentum to test the 50 DMA hurdle at $1,792.
Gold price is resuming its bullish momentum on Wednesday, reversing a major part of the losses incurred on Tuesday. Risk sentiment remains in a better spot, as investors assess the implications of US House Speaker Nancy Pelosi’s visit to Taiwan. Even as China continues to threaten with psychological warfare on the US and Taiwan, markets remain resilient, as there have been no security concerns surrounding Pelosi so far. The resultant risk recovery has weighed down on the safe-haven US dollar, as Treasury yields also return to the red after a sharp upswing seen on Tuesday. Last week’s narrative of a less hawkish Fed and shallower rate hike expectations seem to be back in play, with the US rates resuming their downtrend. Meanwhile, recession risks continue to loom and offer the much-needed support to the bullion. Against this backdrop, the bright metal remains on track to hit the $1,800 mark.
Next of relevant for XAU/USD price remains the US ISM Services PMI and the Prices Paid component for fresh hints on the Fed’s rate hike trajectory, especially after Monday’s ISM Manufacturing Prices Paid sub-index for July dropped dramatically to 60.0 vs. 75.0 expected. However, it remains to be seen if the fresh US data tempers the renewed hawkishness on the Fed’s tightening cycle. A trio of Fed policymakers signaled on Tuesday that there would be easing in the rate-hike track aimed at taming the highest inflation since the 1980s, even though it may affect economic activity negatively.
All eyes also remain on the Pelosi meeting with human rights activists during a visit to the island that has infuriated Beijing. Pelosi met with the country’s President and said, “while respecting our one-China policy, our solidarity with Taiwan is more important than ever.”
Gold price technical outlook: Daily chart
Gold price rallied hard and almost tested the 50-Daily Moving Average (DMA), now at $1,792.
The renewed upswing in the metal calls for a retest of the 50 DMA barrier should buyers regain control above the $1,770 supply zone. The next significant upside hurdle is placed at the previous day’s high of $1,788.
The 14-day Relative Strength Index (RSI) is pointing north while holding above the midline, suggesting that the latest upside could have additional legs.
On the flip side, bears need to find acceptance below the previous day’s low of $1,760 to extend Wednesday’s pullback towards the $1,750 psychological.
Further down, the bearish 21 DMA at $1,733 will be the last line of defense for gold bulls.