XAU/USD Current price: $2,341.03
- The yield on the 10-year Treasury note hit its highest since mid-2023.
- Tensions between Israel and Iran undermine the market mood.
- XAU/USD consolidates around its daily opening, may extend its corrective slide.
Gold consolidates around $2,350 a troy ounce on Monday, struggling to find directional strength in a risk-averse environment. XAU/USD hit an all-time high of $2,431.43 on Friday but closed the day in the red amid continued US Dollar demand combined with profit-taking ahead of the weekly close.
Weekend news kept concerns alive as Iran launched a massive attack on Israel, spurring fears of an Israeli retaliation. Western allies called for the latter to avoid escalating the conflict, but it’s unclear what Israeli Prime Minister Benjamin Netanyahu could do next. Netanyahu is discussing with its cabinet whether or not they will hit back at Iran. Tensions affected Oil prices the most but also backed demand for the Greenback.
The US Dollar is also benefiting from running Treasury yields. The 10-year note currently offers 4.64%, up 13 basis points (bps) and its highest since June 2023. The 2-year note yields 4.94%, up modest 6 bps. Meanwhile, Wall Street battles to reverse Friday’s losses, with the three major indexes trading mixed.
XAU/USD short-term technical outlook
The daily chart for the XAU/USD pair shows it may extend its corrective slide. The pair posted a lower low and lower high but remains above all its moving averages, with a firmly bullish 20 Simple Moving Average (SMA) providing dynamic support at around $2,259.00. Technical indicators, in the meantime, retreated from their recent highs but remain within overbought readings.
In the near term, and according to the 4-hour chart, the risk of a downward extension has increased. A flat 20 SMA caps advances at around $2,356.00, while the longer moving averages are partially losing their upward momentum. The Momentum indicator stands just above its 100 level trying to resume its advance, while the Relative Strength Index (RSI) indicator gains downward traction around 49. The bearish case will be stronger if XAU/USD breaks through $2,319.20, a strong support level.
Support levels: 2,333.80. 2,319.20 2,303.80
Resistance levels: 2,356.10 2,365.25 2,380.00
Additional Insight on Market Dynamics
It is important to note that geopolitical tensions, such as those between Israel and Iran, can have a significant impact on financial markets. In times of heightened uncertainty, investors often seek safe-haven assets like gold, which explains the consolidation around $2,350 in XAU/USD. These tensions not only affect commodity prices like Oil but also influence currency movements, leading to increased demand for the US Dollar.
Furthermore, the correlation between Treasury yields and the US Dollar highlights the interconnectedness of various market factors. Rising yields on Treasury notes demonstrate a growing confidence in the US economy, supporting the strength of the Dollar. This dynamic can influence investor sentiment and trading strategies, particularly in the context of future interest rate decisions by the Federal Reserve.
