XAU/USD looks to regain $1,700 as US Treasury yields drop
Gold consolidates recent losses from nine-month low flashed the previous day.
US stimulus may arrive on Wednesday, US 10-year Treasury yields snap four-day
winning streak.
Risks remain mildly bid, US dollar refreshes highest levels since November 2020.
Gold picks up bids near $1,683, up 0.20% intraday, during early Tuesday. The
yellow metal recently benefited from the recent halt in bond rout while also
ignoring the US dollar’s sustained rally.
The yellow metal’s run-up could be traced from easing reflation fears after US
House Speaker Nancy Pelosi recently signaled that the much-awaited American
fiscal stimulus worth $1.9 trillion will be out by Wednesday, versus widely
expected Tuesday. The same pulled the US 10-year Treasury yields back, currently
down 2.6 basis points (bps) to 1.568%, while snapping a four-day rally.
Even so talks about global economic recovery and a light calendar keep S&P
500 Futures up over 0.20% whereas the US dollar index (DXY) rises to the fresh
high since November 24, 2020. It’s worth mentioning that stocks in Asia-Pacific
also trade mixed as traders are cautious ahead of the key relief package from
America.
On Monday, the yellow metal dropped to the fresh low since June 2020 amid the US
dollar rally and strong Treasury yields defying commodity bulls. However, the
bears seem to have stopped for a breather while waiting for the US House session
on Tuesday.
Additionally, chatters concerning the vaccinations and economic recovery should
also be observed as fears of the coronavirus (COVID-19) variants battle unlock
efforts in the West. Should the global pick-up extends, the yellow metal may
have a further weakness to see.
Technical analysis
Unless breaking a downward sloping trend line from August 2020, currently
around $1,675, gold prices are likely to witness corrective pullback amid
oversold RSI. Also acting as the strong support are the lows marked during May
and June 2020 around $1,670. Meanwhile, an upside clearance of $1,700 threshold
will eye for $1,740 before attacking the key hurdle to the north, marked in
November last year around $1,765.
