The document discusses the recent rebound in gold prices (XAU/USD) amid renewed fears about the coronavirus. It notes that gold prices fell last week as US Treasury bond yields rose, but then rebounded on Friday when a new COVID variant was detected in South Africa. The variant raises concerns about vaccines' effectiveness and sparked a flight to safe havens like gold. Looking ahead, gold prices could continue strengthening if safe haven demand persists, but US bond yields regaining could cap upside if the Fed signals a need to remain patient on rates.
2. Points To Be Discussed Today:
• Gold's Inverse Correlation
• What Happened Last Week
• XAU/USD Technical Analysis
• Moving Averages
• Momentum Oscillators
• Pivot Points
3. Gold's Inverse Correlation
• Gold's inverse correlation with US
Treasury bond yields stays intact.
• Risk aversion ahead of the weekend
helped the precious metal find demand.
• Buyers managed to hold XAU/USD above
several key SMAs.
4. Gold's Inverse Correlation - I
• With the sharp upsurge witnessed in US Treasury
bond yields, gold broke below the previous
week’s trading range and continued to push
lower in the first half of the week.
• After falling to its lowest level since early
November at $1,778 on Wednesday, XAU/USD
has staged a decisive rebound ahead of the
weekend and settled near $1,800 but ended up
closing the second straight week in the negative
territory.
5. What Happened Last Week
• The benchmark 10-year US Treasury bond
yield gained traction during the American
session on Monday and rose more than 5% on
a daily basis.
• In the absence of high-tier macroeconomic
data releases, the weak demand seen at the 2-
year Treasury note auction fueled another leg
higher in yields.
6. What Happened Last Week - I
• Additionally, US President Joe Biden
announced that he had nominated
Jerome Powell for a second four-year
term as the Fed chair, cementing the
view that the Fed could go for a rate hike
by June 2022.
7. The 7-year Treasury Note Auction
• On Tuesday, data published by IHS Markit
revealed that the economic activity in the private
sector continued to expand in early November,
albeit at a softer pace than in October with the
Composite PMI edging lower to 56.5 from 57.6.
• Nevertheless, the 7-year Treasury note auction,
once again, highlighted dismal demand and the
10-year US T-bond yield continued to push higher
toward 1.7%.
8. US Bureau Of Economic Analysis
• The US Bureau of Economic Analysis reported
on Wednesday that the Core Personal
Consumption Expenditures (PCE) Price Index
climbed to 4.1% on a yearly basis in October
from 3.7%.
• Ahead of the Thanksgiving break, the dollar
preserved its strength and didn’t allow
XAU/USD to erase its losses.
9. Gold Surged Higher
• In the meantime, San Francisco Fed President
Mary Daly said that there was a case for the
Fed to speed up the asset tapering while
noting that she wouldn’t be surprised if the
Fed were to hike the policy rate twice next
year.
• Following Thursday’s dull market action, gold
surged higher Friday with investors shifting
their focus to coronavirus headlines.
10. Gold Surged Higher - I
• Reports suggesting that current vaccines
might not be effective against the highly-
mutated COVID variant detected in South
Africa triggered a flight to safety ahead of the
weekend.
• Many countries decided to temporarily
suspend flights from several African countries
and Pfizer said that it will take them around
100 days to produce an adjusted vaccine.
11. Gold Surged Higher - II
• Reflecting the dismal market mood, global
equity indexes suffered heavy losses and the
10-year US Treasury bond yield turned
negative on the week by losing more than 7%,
on Friday.
• Moreover, the CME Group FedWatch Tool’s
probability of the Fed leaving the policy rate
unchanged by June 2022 increased to 34%
from 18% earlier in the week.
12. This Week
• The Conference Board’s Consumer
Confidence data will be featured in the
US economic docket on Tuesday.
• Investors will look for details
surrounding the impact of high inflation
on consumer sentiment
13. This Week - I
• The ADP Employment Change and the ISM
Manufacturing PMI on Wednesday will be looked
upon for fresh impetus ahead of Friday’s
November jobs report.
• Although a better-than-expected increase
in Nonfarm Payrolls could provide a boost to the
dollar, the market reaction could remain limited
unless vaccine producers reassure markets that
they will be able to handle the new variant.
14. Gold Could Continue To Gather
Strength
• Before the Fed goes into the blackout period on
Saturday, December 4, comments from FOMC
policymakers will be critical as well.
• In case Fed officials refrain from suggesting that
they will need to stay patient in the face of
renewed coronavirus fears, US T-bond yields
could regain traction and cap XAU/USD’s upside.
• On the other hand, gold could continue to gather
strength if safe-haven flows continue to dominate
the financial markets.
