Jump to content

Gold Price Outlook: XAU/USD Range Trading Setup as US Yields Rise


MongiIG

Recommended Posts

XAU/USD ANALYSIS:

  • US treasury yields rise across the board: 2,5,10 and 20 year securities
  • Gold’s range trading conditions resume as real yields dampen gold’s long term potential
  • XAU/USD Key technical levels analysed
 

Gold has remained rather quiet as inflation ticks up in the developed world but now we are seeing a number of nominal interest rate hikes expected for 2022 which should raise real interest rates from current low levels. Rising real interest rates tend to have a negative effect on gold as investors rotate towards interest-bearing investments.

Implied Rate Hikes 2022 (Selected Major Central Banks)

MAJOR CENTRAL BANK

IMPLIED NOMINAL INTEREST RATE HIKES*

Federal Reserve (Fed)

4

Bank of England (BoE)

4

European Central Bank (ECB)

1**

Bank of Canada (BoC)

6

*at the time of writing. ** Assuming the ECB hike in 10 bps increments

Source: Refinitiv via overnight interest swap rates

CBOE Gold Volatility Index

Gold Price Outlook: XAU/USD Range Trading Setup as US Yields Rise

Source: CBOE Gold volatility index, Refinitiv

Today the German 10 year Bund trades above zero for the first time since May 2019 and US 2 year treasury trades above 1% for the first time since Feb 2020. There has been a significant rise in yields today across the board.

US Treasury Yields (2,5,10 and 20 year)

Gold Price Outlook: XAU/USD Range Trading Setup as US Yields Rise

Source: Tradingview

Therefore if inflation is due to peak in the coming months and major central banks raise rates anywhere near current projections, then gold starts to look bearish over the medium to long term.

 

KEY TECHNICAL LEVELS FOR GOLD (XAU/USD)

The daily gold chart has proven to be a range traders dream over the last 18 months with rare moves outside of a rather well-defined range between 1754 and 1835. The precious commodity has also adhered rather well to overbought and oversold conditions as can be seen by the commodity channel index (CCI) – adding to the range trading allure.

The yellow metal looks to be coming off its recent high but remains above 1800, providing gold bears with a fairly attractive entry level with the nearest level of support (potential first target) of 1800, followed by 179; while swing traders may look to the 23.6% Fib of the 2020 high to 2021 low (1763).

Should gold hold above the psychological 1800 level, resistance comes in at the 38.2% Fib (1823) and 1835 thereafter.

Gold (XAU/USD) Daily Chart

Gold Price Outlook: XAU/USD Range Trading Setup as US Yields Rise

Source: IG, prepared by Richard Snow

 

Written by Richard Snow for DailyFX.com. 19th Jan 2022.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • Commodity Market Elliott Wave Analysis for Bitcoin, Bonds, Yields, USD/ DXY, Gold, Silver, Iron Ore, Copper, Uranium, Crude Oil, Natural Gas, Corn, Wheat, Soybeans, Coffee, Cocoa. Commodity Market Elliott Wave Analysis Update: Identifying the crucial turn in the USD is paramount in our analysis. However, the challenge lies in interpreting the upward movement of the USD DXY, as it can be construed in multiple ways. To gain clarity on the DXY, I examine the 10-year Yields, which indicate further upside potential. Concurrently, TLT Bonds suggest continued downside momentum. Consequently, Gold, Silver, and base metals remain susceptible to selling pressure. Additionally, the Crude oil market exhibits an upward trajectory, aligning closely with the movement of the USD DXY. Notably, Forex pairs, particularly the AUDUSD, demonstrate a direct correlation due to the interconnectedness of commodity dollars. In summary, the market pivot necessary for trading has yet to materialize and may not occur until mid-March 24. Bitcoin: Wave iv) has concluded, and Wave v) appears poised towards 55k. Dollar: Expectations point to an increase in both the Dollar and Yields, with Bonds likely to decline. Gold and Silver: Currently experiencing a corrective rally. Crude oil: Favorable for long positions in crude, while shorting gas remains advisable. Video Chapters 00:00 Bitcoin (BTC) 03:28 US Dollar Index, DXY / TLT Bonds. US Gov Bonds 10 Yr Yields 05:51 China 15:23 Precious Metals: Spot Gold XAU /GDX ETF / US Spot Silver XAG  16:20 Base Metals: Iron Ore, Copper XCU/USD. Uranium URA ETF 19:59 Energy: Crude Oil WTIOIL / Natural Gas NG 22:22 Softs and Grains, Cocoa, Coffee, Wheat, Soybeans 25:31 End Analyst Peter Mathers TradingLounge™ Australian Financial Services Licence - AFSL 317817 Source: tradinglounge. com  Join & Learn Elliott Wave from Experts Stay ahead of market movements and make informed decisions with our comprehensive analysis.  
    • Yeah, I think it's the mechanism behind the BGB price trend. This could go farther than one would expect. So I'll be trying to add it to my pf to help boost its healthiness in the future.
    • I don't think we can still take part in the airdrop but buying it could be the best option particularly as the market seems to be helping to create a good entry price.
×
×
  • Create New...
us