In the early hours of Monday’s Asian trading session, gold prices showcased a robust rebound, reclaiming ground lost in the preceding two days. This resurgence brought the precious metal closer to the significant $2,200 mark. The uptick in gold prices was buoyed by a retreat in the US Dollar, which paused its recent rally amidst tepid US Treasury bond yields and a mixed market sentiment.
The retreat of the US Dollar was particularly notable, as it stepped back from a five-week peak of 104.50 against major currencies. This pullback was evident in the USD/JPY pair, which corrected from year-to-date highs reached on Friday, spurred partly by concerns over potential intervention in the forex market by Japanese authorities.
Contributing to the Dollar’s decline was a stronger-than-expected fixing of the Chinese Yuan by the People’s Bank of China (PBOC), alongside reports indicating Chinese efforts to bolster the Yuan by selling USD/CNY. These factors collectively fueled renewed weakness in the US Dollar, offering support to gold prices as they rebounded from recent corrections.
Gold prices had experienced a two-day dip following their recent record high of $2,223. However, the current rebound suggests resilience in the market, awaiting fresh catalysts to potentially resume the upward trend.
Last week, the US Dollar had mounted a notable recovery, bouncing back alongside US Treasury bond yields after a dovish outlook on interest rates from the US Federal Reserve (Fed). Despite expectations earlier this year for multiple rate cuts, the Fed held its key rates steady within the range of 5.25% to 5.50% during its March policy meeting. However, market sentiment shifted post-meeting, with increased probabilities assigned to a June easing, according to CME Group’s FedWatch Tool.
Looking ahead, market focus remains on speeches from Fed policymakers and the Core PCE Price Index data, with the US economic calendar relatively light on high-impact releases this week. Additionally, broader market sentiment and US Dollar dynamics are anticipated to continue influencing gold price movements.
With a Bull Flag pattern identified, gold prices remain poised to test the measured target at $2,251 should buying pressure persist. Initial steps include reclaiming the $2,200 threshold following the recent peak at $2,223. Technical indicators, such as the 14-day Relative Strength Index (RSI), signal potential for further upside, while support levels stand at $2,157 and $2,150, with $2,140 representing a critical level to watch in case of sustained downward movement.
