The XAU/USD gold spot price found demand in Tuesday’s session as the world’s main economies reported dismal economic activity numbers, which fuelled a drop in global Treasury yields. Precious metals soared, with silver leading the way with a 3% increase.
Investors digest poor U.S. PMIs
The S&P Global PMIs for the United States were weak. The Manufacturing PMI fell to 47 from 49.3 predicted, while the Services index stayed in expansion territory at 51 despite falling below expectations.
As a result, US bond yields, which are frequently regarded as the opportunity cost of storing non-yielding metals, have fallen as investors appear to be betting on a less aggressive Federal Reserve (Fed). The 2-year yield fell to 4.97%, while the 5- and 10-year rates fell by more than 1% to 4.37% and 4.19%, respectively. Indeed, according to the CME FedWatch tool, the odds of a 25-basis point raise in the forthcoming November meeting have dropped to 35% from 40% at the start of the week, but markets remain convinced that the Fed will halt in September. Following the data, the USD DXY index encountered resistance around the 104.00 level and closed near 103.60.
XAUUSD LEVELS TO WATCH
The focus now goes to Jerome Powell’s speech on Friday, where markets will look for additional hints on the Fed’s next moves. The US Weekly Jobless Claims report on Thursday will also be widely followed.
The XAU/USD buyers have the upper hand, with both the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) firmly located in positive territory on the daily chart. The RSI’s rising slope, as well as the MACD’s green bars, which indicate a strengthening bullish momentum, strengthens this favorable sentiment. Furthermore, the pair is trading above the 20,100,200-day Simple Moving Averages (SMAs), indicating that the bulls are still in charge on a larger scale.
$1,910 (200-day SMA), $1,900, $1,880 are the support levels.
$1,920 (20-day simple moving average), $1,950, $1,970 will be the resistance levels.