Gold critical resistance near $1,830
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Gold is pressing against a critical resistance for the open this week.
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A break of $1,830 opens risk towards $1,850 while a move lower will target $1,820 and then $1,805.
Gold price ended the final day of 2021 on a bullish note, at the strongest levels in six weeks at $1,830. The year-end profit-taking in the US Treasury yields from monthly peaks helped gold extend its two-day rebound while the dollar also bore the brunt of repositioning. The benchmark 10-year rates briefly dropped below the 1.50% level before recapturing the latter and limiting gold’s upside. A negative finish to 2021 for Wall Street indices also underpinned the bullish tone in the bright metal. Gold price, however, booked the worst year since 2015 amid fading coronavirus fears and expectations of monetary policy normalization by major global central bankers in the year to come. Holiday-thinned market conditions further helped gold buyers, as the price added 0.71% on the day.
The year-end flows favored gold buyers on Thursday, prompting a sharp comeback in the bright metal to reach fresh two-day tops at $1,817. Investors paid a little heed to the weekly US Jobless Claims, as the end of the year sentiment led the way and injected volatility in gold price. In absence of any market-moving news, profit-taking in the US Treasury yields, following the upsurge to four-week highs, emerged as the key catalyst behind gold’s turnaround. The negative close on Wall Street indices, growing Omicron cases globally and a pullback in the greenback also aided the renewed upside in gold price.
On the final trading day of 2021, gold price is building on the previous rebound, flirting with a fresh monthly high of $1,820. The market mood remains cautious, underpinning the US dollar. However, gold bulls remain undeterred amid the recent weakness in the yields. Note that the benchmark 10-year Treasury yields are on course to end 2021 above the key 1.50% level, which could flash a bearish signal for the non-yielding gold. Meanwhile, the Wall Street sentiment on New Year’s Eve will play a pivotal role in gold’s end to 2021.
Gold price has started out the first trading day of 2022 on the wrong footing, as investors take profits off the table ahead of a busy week, full of top-tier US economic events. The US ISM PMIs, the FOMC minutes and Nonfarm Payrolls are likely to cheer the Fed hawks. The build-up to these events is prompting a rebound in the US dollar across the board, pulling gold price lower from fresh six-week highs of $1,832. Meanwhile, the US yields are trading listlessly, as most Treasuries are on a holiday in Asia. Concerns over surging covid cases globally and resurfacing China’s Evergrande risks seem to be aiding the recovery in the safe-haven dollar at gold’s expense. Later in the day, the Euro area and the US Markit Manufacturing PMIs will offer some trading incentives to gold traders after a holiday season lull.
Short Term Outlook
A break of $1,830 opens risk towards $1,850 while a move lower will target $1,820 and then $1,805.
