Despite the recent ascent, the path of least resistance for gold remains to the downside
Following a five-day winning streak, gold prices turned negative on Tuesday as the USD index is edging higher on the back of rising US Treasury bond yield. At the beginning of the week, the XAUUSD pair exceeded the $1,800 barrier but now struggles to hold above this psychological level as the downside pressure has reemerged.
Now, investors wait for the key central bank meetings due this week. against this backdrop, risk-sensitive assets could come under pressure, but the precious metal may fail to capitalize on risk aversion if the greenback climbs across the board.
Also, the bullion lacks the upside momentum as hedge funds are reluctant to jump into gold at this stage. The yellow metal will probably have to edge lower from the current level in order to attract a more robust and sustained buying pressure.
Despite the recent ascent, the path of least resistance for gold remains to the downside as the dollar will likely rally next week when the Federal Reserve would announce a start to tapering. Against this backdrop, the metal may lose ground again to get back below the 20-DMA, today at $1,770. Also, the prevailing risk-on sentiment in the global financial markets acts as another headwind for the safe-haven metal.
In the short term, the XAUUSD pair needs to hold above $1,800 in order to preserve recent gains and revisit early-September highs seen last Friday around $1,813. The immediate support is represented by the 100- and 200-DMAs around $,1790. As long as the prices stay above these moving averages, downside risks are limited. As of writing, the bullion was changing hands around $1.801, down 0.22% on the day. On the weekly charts, however, gold prices stay are holding in positive territory so far.