Gold Price Action Torn Between Varying Market Sentiments

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Azeez Mustapha

Updated: 13 October 2022

Gold (XAU/USD) traded on a mildly negative note through the early European session, although it remained well in a consolation range.

The upbeat market sentiment appears to be a factor in keeping the yellow metal under pressure. However, a weaker US dollar, coupled with fears over a second wave of the virus, and growing geopolitical tensions might sustain the commodity from falling lower.

The global risk sentiment was bolstered by the Fed’s decision to begin buying investment-grade US corporate bonds, the Trump administration’s decision to inject another $1 trillion into infrastructure spending, and a positive breakthrough in the battle against the Covid-19 pandemic.

However, investors are becoming increasingly bearish following a sharp rise in Covid-19 infection in the US and the escalating geopolitical tensions in Asia. It was reported yesterday that tensions in the Korean Peninsula intensified after North Korea blew up a joint liaison office in South Korea. Also, India and China suffered some casualties in a clash at the Himalayan border area.

Furthermore, a weaker USD caused by a fresh leg down in the US Treasury bond yields could provide more boost for the dollar-denominated commodity.

In the meantime, market participants will be focused on the US housing market data and the Fed Chair’s second-day testimony today for meaningful trading opportunities.

Gold (XAU) Value Forecast — June 17

XAU/USD Major Bias: Sideways

Supply Levels: $1,730, $1,735, and $1,745

Demand Levels: $1,710, $1,704, and $1,700

Gold remains under a strong bearish influence and a drop below $1,700 could confirm this sentiment. However, it seems very unlikely that bears will take control considering the macroeconomic conditions at play. We will be looking at our key support at $1,711 (ascending channel baseline) for the near-term trading sentiment. A bounce off that line could send gold back to the $1722 – $1,735 consolidation range and possibly higher. On the flip side, a failure to bounce off that line could send gold quickly to the $1,704 – $1,700 region.

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