Gold Price Overview: XAU/USD Falls Again Below $1780, Maintaining A Sell On Advances In An Unfavorable Yield Climate
Spot Gold (XAU/USD) valuations have been ebbing away from Asia Pacific session peaks all through the European Monday morning in front of the US open, with spot rates now back beneath $1780 after reaching as high as $1787 at one point earlier in the day.
Notwithstanding Omicron-inspired risk-off movements that have pulled global equities markets downward from record highs achieved as recently as mid-November, the yellow metal was unable to reap the benefits of its safe-haven reputation in recent weeks.
Another important factor has been the fact that the US macroeconomic data has stayed good and that the Federal Reserve has flipped hawkishly and is now projected to hasten its QE taper beginning in January.
As a result of the hawkish swing, short-end and real US rates have risen, raising the potential cost of owning Gold that does not yield.
In the short term, nominal US rates are higher throughout the curve on Monday, however, this has nothing to do with US data or the Federal Reserve and is instead a reflection of a more risk-on mood in the market.
Despite the fact that the intensity of illness affiliated with Omicron Covid-19 variant viral infection appears to be mild in comparison to other variants, the information out of South Africa continues to be positive, and the PBoC astonished market players by cutting the RRR by 50 basis points.
This would result in the release of CNY 1.2 trillion in liquidity from the Chinese banking sector, which should help to boost the weakening global economy.
Outlook Of The Technical Front
XAU/USD CHART Source: Tradingview.com
Because of the higher yields, market players are observing rallies towards the 200-day and 50-day moving averages a little above $1790 as a selling possibility in spot Gold for the time being.
It is possible that if more positive Omicron newsflow continues to support risk appetite, longer-term returns (which have been under massive pressure recently) will begin to recover back towards recent highs, and global equities will begin to grind back towards recent highs.
This would almost certainly be a lethal mix for safe-haven Gold, which might fall even further to test recent low points around $1760 in the process.
Another important event for Gold traders to watch out for in the near future is the release of the US CPI report on Friday.
If it continues to surprise the upside (the headline year-over-year rate is expected to rise to 6.8% from 6.2% in November), it will reinforce anticipations for a hawkish Fed transition at the December 15 meeting.