Price of Gold Outlook: Surging US Dollar Plunges XAU/USD, Losses May Extend

prices of gold

GOLD TECHNICAL OUTLOOK: NEUTRAL

  • Prices of gold suffered from the US Dollar gaining ground
  • Declining Treasury yields to offer some cushion
  • Eyes on US Fiscal Stimulus, non-farm payrolls
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The prices of gold dropped the most from august last despite more losses on the S&P 500 index. The anti fiat gold struggled in a setting where the USD was rising; the risk aversion placed more premium for the liquidity. Interestingly, Treasury yields stuck to their ground for the better part of last week, particularly on the longer-dated spectrum.

Dropping yields will have most likely assisted cushion the XAU/USD selloff. This might vividly highlight their resilience. One major reason may be the doubt over extra fiscal support or the last of expediency. Jerome Powell, the Federal Chairman stressed that more congressional testimony is needed. This is happening with the markets having been left frustrated over the necessity of extra quantitative easing as Australian Dollar Might Extend Fall Despite Eased Coronavirus Restrictions.

With the gold-bearing no interest for holding, they are extensively priced in the US Dollar around the world. This can be very sensitive to movements in the United States government bonds and the US Dollar. More strength in the Greenback might continue working what was expected, especially incase risk aversion picks the pace in the financial markets. Also, the flight to safety in buying Treasuries might cushion the downtrend gold potential.

Keeping this in mind, everything seems to focus on the US Congress this week, the house democrats are now drafting the $2.4 trillion stimulus suggestion that might pass in the house. President Trump has fully entertained backing the large stimulus deal. Also, it will need the blessing of the senate.

Gold Technical Drivers Chart

All eyes seem to be on the weekend to the US non-farm payrolls. Data from the world’s biggest economy continue outperforming the expectations of economists, but this has narrowed the margin from July. Markets are looking forward; continued threat over the fiscal package stimulus might cast the shadow over the changes over the expected economic recovery.

 

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