Gold price is on a price consolidation pattern for the 5th consecutive day as the US dollar remains relatively strong. However, the precious metal is finding support from the easing of the US treasury yields. Investors are now keen on Powell’s testimony and the US new home sales data.
Gold price bear season
Gold price has remained in the bear market amid a strengthening US dollar. After hitting an all-time high of $2,067.15 in August 2020, the precious metal is now trading at $1,740.56. This marks a decline of about 19%.
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The decline comes at a time when the US dollar has been strengthening. The precious metal tends to have an inverse relationship with the greenback. This is because a strong dollar makes it more expensive for the holders of other currencies to buy the precious metal, hence a decline in its demand.
The dollar index, which tracks the value of the US dollar against that of several other currencies, is up by 0.38% at $92.09. Furthermore, the Euro and Pound are trading lower against the greenback by 0.36% and 0.46% respectively. At the same time, USD/CHF and USD/CAD are up by 0.80% and 0.37% correspondingly.
Notably, gold price has been trading sideways for five consecutive sessions. It is finding support in the easing of the US treasury yields. On Tuesday, the 10-year bond yields pulled back further to 1.649. The 30-year yields also dropped by 0.86%. This is the market’s reaction to the Fed Chair and Treasury Secretary’s anticipated testimony on the COVID-19 pandemic. On Monday, Powell indicated that the recovery of the US economy was faster than expected, but still had a long way to go.
Investors looking to trade gold are now keen on the US new home sales numbers expected later today. January’s figure was higher-than-expected at 923,000. However, analysts expect February’s reading to come in lower at 875,000. If the actual figure beats the estimates, it will further strengthen the US dollar and exert additional pressure on gold price.
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Gold Price Technical Outlook
Gold price has remained below the 200-day exponential moving average throughout the year. Besides, it has been within the bearish flag since February. It is currently trading along the 20 and 50-day moving averages. Until it moves past the 200-day EMA to the upside, it will remain in the bear market. In the near-term is likely to find resistance at around $1,756 and support at $1,720. On the lower end, the targets to look out for are the psychological 1,700 and the lower level of 1,680. However, if the bulls manage to take control of the market, they will be testing 1,780 and 1,800.
