Loading the Elevenlabs Text to Speech AudioNative Player...
- In the past four weeks, Gold (XAU/USD) has traded in a tight range environment below US$2,532 key intermediate range resistance.
- Positive momentum reading and a major bearish breakdown seen in the 10-year US Treasury real yield may trigger a bullish breakout in Gold (XAU/USD).
- Watch the key medium-term support at US$2,435 for Gold (XAU/USD).
This is a follow-up analysis of our prior report “Gold Technical: The recent sell-off may have reached a potential bullish reversal level at US$2,353” published on 26 July 2024. Click here for a recap.
Since our last publication, the price actions of Gold (XAU/USD) have managed to stage a rebound above the US$2,353 bullish reversal level and resumed its impulsive upmove sequence to print a recent fresh all-time level of US$2,352 on 20 August.
Considering the upcoming key US inflation data release later today, where the core inflation rate for August is expected to show signs of a deceleration trend continuation of the inflationary conditions in the US, coming in at 3.2% y/y, a similar pace to 3.2% recorded in July, which was a three-month low.
Through the lens of technical analysis, several positive elements have emerged that may support a potential bullish breakout for Gold (XAU/USD) after four weeks of tight-range trading.
10-year US Treasury real yield has staged a major bearish breakdown
Fig 1: US 10-YR Treasury real yield major & medium-term trends as of 11 Sep 2024 (Source: TradingView, click to enlarge chart)
The 10-year US Treasury real yield is measured by subtracting the 10-year breakeven inflation rate derived from 10-year US Treasury Inflation-Protected Securities (TIPS) from the nominal 10-year US Treasury yield.
If the 10-year US Treasury real yield is trending downwards, it implies that the long-term real opportunity cost of holding Gold (XAU/USD) is reduced as Gold is a non-income bearing asset, and vice versa when the 10-year US Treasury real yield trends upwards (see Fig 1).
Right now, the 10-year US Treasury real yield has just breached below major support at 1.62% (in place since late December 2023) which suggests that Gold (XAU/USD) has become more valuable as its associated long-term opportunity costs may be further reduced given the next medium-term support of the 10-year US Treasury real yield rests at 1.38%.
Hence, it may propel more demand for Gold (XAU/USD) which in turn is likely to drive up its price.
Medium-term momentum remains positive for Gold
Fig 2: Gold (XAU/USD) major & medium-term trends as of 11 Sep 2024 (Source: TradingView, click to enlarge chart)
The price actions of Gold (XAU/USD) have continued to oscillate within its medium-term ascending channel in place since the 6 October 2023 low of US$1,810 and are supported by a rising 50-day moving average that is also confluences closely with its key medium-term pivotal support at US$2,435.
In addition, the daily RSI momentum indicator has continued to display a series of “higher lows” above its 50 level and has not reached an overbought condition.
These positive technical elements suggest that upside momentum may be building up for a potential bullish breakout for Gold XAU/USD, a clearance above US$2,532 may see the next medium-term resistance zone coming in at US2,640/715 in the first step (see Fig 2).
On the other hand, a break below US$2,435 negates the bullish scenario to kick start a potential multi-week corrective decline sequence within its medium-term and major uptrend phases to expose the next support at US$2,359, and below it sees an increased risk for an extension of the corrective decline towards the US$2,285 long-term pivotal support (also close to the 200-day moving average).
Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.
Keep Up to Date with the Most Important News
