Update May 18: The XAU/USD pair advanced to its highest level since late January at $1,875 on Tuesday but lost its traction during the American trading hours. As of writing, gold was virtually unchanged on a daily basis at $1,866. Earlier in the day, the broad-based selling pressure surrounding the greenback helped XAU/USD preserve its bullish momentum. However, with Wall Street’s main indexes trading mixed after the opening bell, the USD selloff softened and XAU/USD started to edge lower. In addition, technical indicators in the short-term show overbought readings after XAU/USD gained nearly 3% in the last three days, suggesting that Tuesday’s price action could be seen as a correction.
At the time of writing, the gold price is trading a touch higher in Asia by some 0.13% in XAU/USD.
XAU/USD rose by 1.26% to $1,868.50 on Monday and has added a buck to reach a new cycle high of $1,869.71 on a cautious start to the week for global financial markets.
Overnight, global equities were under pressure with bond yields edging higher making for a Goldilocks scenario for gold as markets fret over the US inflation story following last week’s CPI beat.
Meanwhile, the Federal Reserve’s vice chairman Richard Clarida has said the Fed will respond to higher inflation should that be required, but he and others, including Fed’s chair, Jerome Powell, have constantly insisted that now is not the time to start taper talk while employment remains deep in a hole.
We will see the minutes on Wednesday from the Federal Reserve’s policy meeting last month.
Investors will be on the lookout for more meat on the bone in the policymakers’ outlook of an economic rebound and clues regarding their thinking about inflation spikes and the ongoing economic recovery.
Money managers increased net length
Meanwhile, analysts at TD Securities explained that money managers ultimately increased their net length as the disappointing non-farm print catalyzed a round of algorithmic short-covering, helping prices to break out north of the $1800/oz range.
”At the same time, we’ve noted that the composition of gold flows is changing, highlighting that discretionary capital could once again be flowing into gold, but rising ETF flows alongside money manager positioning have since lent strength to this view — particularly as the “transitory” debate surrounding inflation gathers share of mind.
Pick your poison, but the most plausible scenarios should all see gold prices ultimately firm.”
Gold forecast – Technical analysis
As per the prior analysis, Chart of the Week: Gold on the approach to $1,855, the price of gold has added to Friday’s bullish close.
Prior analysis, daily chart
‘From a daily perspective, the bulls are…
Go to the news source: XAU/USD pares gains after climbing to multi-month highs at $1,875