- Gold once again faced rejection near 200-DMA and has now filled the weekly bullish gap.
- The risk-on impulse and rising US bond yields acted as a headwind for the commodity.
- The emergence of some USD dip-buying further contributed to the intraday selling bias.
Gold continued with its struggle to make it through the very important 200-day SMA and witnessed some intraday selling near the $1,840 area on Monday. The intraday downtick dragged spot price to the lower end of the daily trading range, around the $1,828 region during the early North American session and was sponsored by a combination of factors.
Investors turned optimistic amid hopes that inflation is nearing its peak, bolstered by the recent sharp decline in commodity prices. This was evident from a generally positive tone around the equity markets, which acted as a headwind for the safe-haven gold. The risk-on flow pushed the US Treasury bond yields and further contribute to capping gains for the non-yielding yellow metal.
A goodish pickup in the US bond yields allowed the US dollar to reverse its modest intraday losses to over a one-week low. The greenback drew additional support from upbeat US Durable Goods Orders, which unexpectedly increased by 0.7% in May. Orders excluding transportation items also surpassed estimates and rose 0.7%. A stronger USD exerted additional pressure on the dollar-denominated gold.
The downside, however, seems cushioned, at least for the time being, amid growing recession fears and expectations that some G7 countries plan to ban bullion imports from Russia. This might tighten supplies and continue lending support to gold prices. This makes it prudent to wait for strong follow-through selling before positioning for any further near-term depreciating move.
Nevertheless, gold has now filled a weekly bullish gap and repeated failures near a technically significant moving average suggest an eventual breakdown to the downside. Hence, any attempted recovery might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly near the $1,848-$1,850 region, which should act as a pivotal point for gold prices.
Technical levels to watch
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