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18.01.2022 15:00

Gold Price Forecast: XAU/EUR retreats towards 200-SMA as German Bund yield refresh 34-month high

  • Gold prices snap two-day uptrend as Euro tracks firmer Bund yields.
  • Increasing hopes of faster monetary policy normalization in Europe, the US propel yields.
  • Virus woes, stimulus hopes fail to provide decisive signals.

Gold (XAU/EUR) declines to €1,593, down 0.06% intraday as bears sneak in after a two-day absence during early Tuesday in Europe.

In doing so, the gold prices take clues from the firmer German Bund yields, as well as virus woes, while snapping a two-day uptrend.

That said, German 10-year Bund yields rose 1.6 basis points (bps) to -0.008%, the fresh high since May 2019 at the latest. In doing so, the German bund coupons track their US counterparts.

It’s worth noting that the US 10-year and 5-year Treasury yields refresh two-year highs while the 2-year bond coupon jumps to the February 2020 levels amid escalating future market bets on the US Federal Reserve’s (Fed) faster rate hikes in 2022. “Fed fund futures extend slide as December 2022 implies rates of 1.05%, July 2023 near 1.50%,” said Reuters.

Elsewhere, Australia reports the biggest daily death toll due to the covid, China braces for tighter activity controls in Tianjin. Further, Japan’s Tokyo also braces for quasi-emergency together with the other nine prefectures.

Amid these plays, stock futures in the US and Europe print losses while crude oil prices improve.

Moving on, ZEW sentiment numbers for Germany and Eurozone for January will be crucial to watch for immediate directions.

Technical analysis

Gold prices step back from a two-week-old symmetrical triangle’s resistance line, as well as the 100-SMA, amid steady RSI line.

Given the repeated failures to cross the triangle and the key SMA, the metal prices are likely declining towards the 200-SMA level of €1,588. Though, a convergence of the 50% Fibonacci retracement of December-January upside and support line of the stated triangle, near €1,584, will challenge the metal’s further weakness.

On the contrary, an upside clearance of €1,595 will propel the XAU/EUR towards the €1,600 threshold. Following that, the monthly peak near €1,614 will be in focus.

Overall, gold prices in Euro are likely to witness a pullback inside a short-term neutral chart pattern.

Gold: Four-hour chart

Trend: Further weakness expected


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