A slump in the US dollar index to a 1-month low on Friday provided support for Gold, while a spike in new global Covid infections to a new record high above 2 million boosted safe-haven demand for the precious metal. Additionally, gold prices found support on Friday from lower T-note yields. US 10-year Treasury yields finished 2021 above the 1.5% threshold in a year marked by the Covid pandemic and Federal Reserve policies.
The yield on the benchmark 10-year Treasury note was little changed at 1.512%. The yield on the 30-year Treasury bond fell 2 basis points to 1.905%. The 10-year yield started the year at 0.91% and hit a high of 1.776% in March. The pandemic had the biggest impact on bond markets in 2021. Treasury yields have been moving throughout the year on concerns about inflation and as the Federal Reserve eased its pandemic-era loose monetary policy.
This month the central bank plans to accelerate the reduction in monthly bond purchases. The Fed then expects to start raising interest rates once the tapering ends. Many market strategists expect Treasury yields to creep higher in 2022, and this will pose a threat to commodity assets, especially gold.
The US dollar index closed 2021 with a -0.39% drop on Friday to a 1-month low as the Chinese yuan strengthened. USDCNY fell to a 3-1/2 year low on Friday as signs of a strengthening Chinese economy boosted the yuan. China’s December manufacturing PMI unexpectedly rose +0.2 to 50.3, stronger than expectations of a decline to 50.0 and the fastest pace of expansion in 5 months.
XAUUSD, Daily
Gold finished the trading week near the area of 1826. XAUUSD continues moving as part of the correction and the formation of the triangle pattern. The flat 200-day moving averages indicate the trend of gold moving in a range. The asset price seems to be trying to test the average of the previous monthly high around 1834 which indicates pressure from buyers and a potential continuation of the price hike up to the limit of the descending trendline. At the moment, the price decline is expected to retest the round number level around the 1800/200 EMA, if the 1834 area cannot be crossed, with the hope that gold price growth will match the opening level of 2021.
XAUUSD,H4
The intraday bias remains at the validated upside of the price structure forming a higher low (HL) and a higher high (HH); the asset price is moving above the 200 EMA and above the Kumo which is limited by the resistance level of 1834. A move above this level could signal a potential bullish development for the 1877 price level. As long as the resistance at 1834 holds, the price rally will be halted and return to the downside for 1800.
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Ady Phangestu
Market Analyst
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