XAU/USD Turns Bullish On Falling Bond Yields, Technical Breakout

1. XAU/USD Turns Bullish On Falling
Bond Yields, Technical Breakout

2. Points To Be Discussed Today:
• Gold Fluctuation
• Gold Struggled To Find Direction
• Gold Could Lose Interest
• Gold Technical Outlook
• Gold Sentimental Poll

3. Gold Fluctuation
• Gold has fluctuated in a wide range
throughout the week.
• Falling US Treasury bond yields
supported XAU/USD in face of broad USD
strength.
• Investors will keep a close eye on yields
amid a lack of high-tier data releases.

4. Gold Struggled To Find Direction
• Gold struggled to find direction in the first half of the
week but came under strong bearish pressure late
Wednesday with the initial market reaction to the US
Federal Reserve’s policy announcements.
• The sharp decline witnessed in the benchmark 10-year
US Treasury bond yield, however, allowed XAU/USD to
stage a decisive rebound toward $1,800 on Thursday.
• Although the dollar ended the week decisively higher
against other major currencies, gold didn't have a
difficult time clinging to its gains in the second half of
the week.

5. What Happened Last Week
• The data from the US revealed on Monday that
the ISM Manufacturing PMI edged lower to 60.8
in October from 61.1 in September.
• The Prices Paid component of the ISM’s survey
jumped to 85.7 from 81.2, confirming that input
price pressures remained elevated.
• Nonetheless, XAU/USD stayed in a consolidation
phase with investors moving to the sidelines
ahead of the Fed’s policy decisions.

6. Fed’s Policy Decision
• As expected, the Fed left its benchmark
interest rate, the target range for federal
funds, unchanged at 0%-0.25%.
• And unveiled that it will start reducing
asset purchases by $15 billion per month
starting mid-November.

7. Inflation
• During the press conference, FOMC
Chairman Jerome Powell reiterated that they
will not automatically hike the policy rate once
the quantitative easing program concludes.
• The chairman further emphasized that they
see higher inflation persisting and said that
they will be ready to address that risk.

8. XAU/USD Turned South
• While responding to questions from the press,
Powell explained that the liftoff test was clearly
not met on the employment goal and noted they
want to see further improvement in the labour
market before they consider a rate hike.
• Although the immediate market reaction caused
the greenback to weaken modestly against its
major rivals, XAU/USD turned south with 10-year
US T-bond yield shooting higher.

9. The Dollar’s Market Valuation And
Yields
• On Thursday, the dollar regathered its strength
and registered impressive gains against European
currencies but gold managed to gain traction
amid falling T-bond yields.
• As it currently stands, the
positive correlation between the dollar’s market
valuation and yields seems to have weakened.
• More importantly, yields are having a more
significant impact on XAU/USD than the dollar’s
relative performance against other major
currencies.

10. The Dollar Preserved Its Bullish Bias
• Meanwhile, the Bank of England’s decision to
leave its policy rate unchanged at 0.1% was
another factor that weighed on global yields on
Thursday.
• On Friday, the US Bureau of Labor Statistics
reported that Nonfarm Payrolls rose by 531,000
in October, surpassing analysts' estimate of
425,000.
• The dollar preserved its bullish bias after this data
but gold stayed resilient with the 10-year yield
breaking below 1.5% on Friday.

11. Gold Could Lose Interest
• There won’t be any high-tier macroeconomic
data releases at the start of the week and
investors will keep a close eye on US T-bond
yields.
• Currently, the 10-year yield is below 1.5% and
unless it manages to rebound above that level,
XAU/USD could continue to push higher.
• On the other hand, gold could lose interest in
case the 10-year yield reclaims 1.6% and steadies
above that level.

12. The Personal Consumption
Expenditures (PCE)
• On Wednesday, the US Bureau of Labor Statistics
will release the October Consumer Price Index
(CPI) data.
• The Core CPI, which excludes volatile food and
energy prices, is expected to remain unchanged
at 4% on a yearly basis.
• Since the Fed uses the Personal Consumption
Expenditures (PCE) Price Index as its preferred
gauge of inflation, the market reaction to the CPI
data could remain limited.

13. Gross Domestic Product (GDP) Data
• On Thursday, the UK’s Office for National
Statistics will publish the third-
quarter Gross Domestic Product (GDP)
data.
• Following the BoE’s latest policy decisions,
the CME Group BoEWatch Tool shows there
is a 67.5% chance of a 15 basis points rate
hike in December.

14. The GDP Report Shows A Significant
Slowdown
• In case the GDP report shows a significant
slowdown in the UK’s economic activity, the
odds of a December hike could decline and
weigh on global yields.
• The University of Michigan’s preliminary
November Consumer Sentiment Index will be
featured in the US economic docket on Friday.

15. Gold Technical Outlook
• Gold closed above the 200-day and the 100-day
SMAs for the second straight day on Friday.
• Additionally, the Relative Strength Index (RSI)
indicator on the daily chart rose above 50,
confirming the bullish shift in the near-term
outlook.
• On the upside, XAU/USD could target $1,810
(static level) ahead of $1,820 (Fibonacci 38.2%
retracement of the April-June uptrend).

16. Gold Technical Outlook - I
• A daily close above the latter could open
the door for additional gains toward
$1,835 (static level).
• First support now aligns at $1,790 (200-
day SMA) before $1,785 (100-day SMA)
and $1,770 (Fibonacci 61.8%
retracement).

17. Gold Technical Outlook - II

18. Gold Sentiment Poll

19. Gold Sentiment Poll - I

20. XAU/USD Turns Bullish On Falling
Bond Yields, Technical Breakout

21. Thanks for listening
XAU/USD Turns Bullish On Falling
Bond Yields, Technical Breakout