Gold Finds Support Ahead of Key Events: US CPI and ECB Policy Decision

• Last Friday’s price actions of spot Gold (XAU/USD) have managed to find support again at the 200-day moving average ahead of the US CPI data release & ECB monetary policy decision this week.
• The recent -5.15 % decline seen in Gold from its 20 July 2023 swing high of US$$1,987.53 has started to see some signs of short-term bullish reversal elements since 21 August 2023.
• The up-trending 10-year US Treasury real yield has also started to consolidate between 1.95% to 2.00% level which may negate the bearish tone on Gold at least in the short-term.
• US$1,910 support and US$1,932 resistance are the two key short-term technical levels to watch.

 

Since its 20 July 2023 swing high of US$1,987.53, spot Gold (XAU/USD) has declined by -5.15% to print a low of US$1,885 on 17 August 2023 in line with a rising longer-term 10-year US Treasury real yield which increased the opportunity costs of holding gold as it is a non-interest yielding asset.

 

Major uptrend remains intact

Fig 1: Gold (XAU/USD) major trend as of 11 Sep 2023 (Source: TradingView, click to enlarge chart)

Despite the underperformance of Gold seen in the past five weeks, its major uptrend phase in place since the 3 November 2022 low of US$1,616 remains intact as the -5.15% fall from the 20 July 2023 high of US$1,987.15 has managed to stall at the lower boundary of a major ascending channel from its 3 November 2022 major swing low and close to the 38.2% Fibonacci retracement of the prior major uptrend phase from 3 November 2022 low to 4 May 2023 high (see daily chair).

Also, the up-trending 10-year US Treasury real yield (derived via the inflation-protected securities, TIPS of the same duration) has started to consolidate at the 1.95% to 2.00% level which may negate the bearish tone on Gold at this juncture.

 

 

Short-term momentum has tilted toward the bullish camp