- Gold price consolidates near weekly highs as the US Dollar pauses the sell-off.
- US Treasury bond yields continue the advance ahead of the United States data.
- Gold price could resume an uptrend toward $1,830 on a ‘Santa rally’.
Gold price is reversing slightly from one-week highs of $1,821 reached on Tuesday, as bulls gather strength before resuming the uptrend. The latest leg down in Gold price could be attributed to a broad-based rebound in the United States Dollar (USD), as it benefits from the continued surge in the US Treasury bond yields.
A Santa rally could down the US Dollar on weak United States data
The US Dollar rebound appears at risk amid a recovery in risk sentiment, as global markets look to stabilize after the Bank of Japan’s (BoJ) surprise yield move-led havoc on Tuesday. The Wall Street stocks staged a modest comeback, ending a four-day losing streak and offering the much-needed respite to investors. Traders have turned optimistic of a potential ‘Santa rally’ in the making, as head toward the Christmas holiday season. The extended risk rally, the ‘Santa rally’, could weigh negatively for the safe-haven United States Dollar, providing traction to the Gold price for the further upside. That could materialize if the United States Conference Board Consumer Confidence and Existing Homes Sales data disappoint and revive the narrative of a dovish US Federal Reserve (Fed) pivot in 2023. Tuesday’s US Housing Starts and Building Permits fell short of market expectations and exacerbated the pain in the US Dollar.
Bank of Japan’s surprise move smashed the US Dollar
On Tuesday, Gold price soared over 1% and reached its best level in a week after the United States Dollar got heavily sold off in to the surprise action by the Bank of Japan, at its policy decision. The Bank of Japan altered its yield curve control framework by allowing the 10-year Japanese Government Bond yield to rise to around 0.5%, up from the previous upper limit of 0.25% while announcing additional bond purchases. The unexpected move rattled investors’ sentiments and triggered a collapse in the bond and stocks market, spiking up US Treasury bond yields. The USD/JPY pair plummeted around 4%, its biggest daily slump since October 1998, dragging the US Dollar sharply lower, what could be seen as a correction following the hawkish Federal Reserve policy decision that led to the last week’s rally.
Gold price technical analysis: Daily chart
Gold price needs to recapture the previous high of $1,821 to challenge the multi-month top at $1,825. Acceptance above the latter will initiate a fresh upswing toward the $1,830 round figure.
The 14-day Relative Strength Index (RSI) has turned but holds comfortably above the midline, suggesting that any pullback in Gold price remains a ‘good buying’ opportunity.
Further, the bullish 21-Daily Moving Average (DMA) at $1,782 is on the verge of cutting the horizontal 200DMA at $1,785 from below, awaiting confirmation of another Bull Cross.
The upward-sloping 50DMA pierced through 100DMA for the upside last week, which could be partly attributed to the renewed upside in the Gold price.
However, if Gold bulls fail to take out the $1,825 resistance, then a reversal toward the 200DMA support. Ahead of that the December 14 high of $1,814 could be tested.
Also, the $1,800 threshold will offer strong support to Gold buyers should the retracement gather traction.