Gold (XAU/USD) traded on a sideways pattern in the early European session on Tuesday, as the commodity struggled to capitalize on its bullish momentum from the previous two sessions.
It appears that the market has begun pricing in the possibility of a Democratic win in the crucial US Senate runoff elections in Georgia. The final election results will not be out until the end of today, albeit with the increasing likelihood of a Democrat-controlled Senate.
A Democrat-controlled senate will give President Joe Biden easier access to his preferred economic policies, including additional—and possibly larger—stimulus measures and infrastructure projects. This possibility has caused the US dollar (DXY) to come under immense pressure, thereby extending further support to the dollar-denominated commodity. Also, the prospects of stricter regulations for large tech companies—and the industry as a whole—caused the Nasdaq futures to slide by nearly 2%, which bolstered gold even further.
Meanwhile, the 10-year US Treasury yield rose beyond 1% for the first time since March on the expectations of larger government borrowing. This rise is probably the only factor capping gains for the non-yielding metal. Also, investors are hesitant to place any aggressive bets ahead of the FOMC minutes scheduled for later today.
In the meantime, the greenback’s price dynamics and the broader market risk sentiment will provide trading opportunities for the precious metal.
Gold (XAU) Value Forecast — January 6
XAU/USD Major Bias: Bearish
Supply Levels: $1950, $1965, and $1980
Demand Levels: $1920, $1907, and $1900
At press time, gold appears to be stalling near the top of our ascending channel as bullish momentum dwindles. That said, we expect a sharp price correction in the near-term to the lower-$1900 area.
Our 4-hour MACD indicator pronounces the impending correction even better, as the commodity retreats from overbought territories.
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