- Gold prices snapped a two-day corrective decline on the final trading day of the week.
- Optimism that China will reopen will cause US Treasuries to retreat as the US dollar rebounds.
- Gold price eyes 50-simple moving average support between the bearish RSI on the 4H chart.
Gold prices are trading modestly flat so far this Friday, as bears take a breather after two straight days of corrective declines from a three-month high at $1,787. Despite trading close to its best level since August, gold prices are set to end the week in the red.
US dollar retreats despite Federal Reserve comments
Gold prices are consolidating recent losses as the US dollar rebounds in Asia this Friday. Investors are increasingly optimistic on prospects for China’s recovery, especially after Goldman Sachs said on Thursday that Chinese gross domestic product (GDP) growth will pick up in the second half of 2023 and into 2024 after the initial negative impact of the economy exiting its Covid-19. strategy in the spring, according to Bloomberg.
Additionally, the US dollar also bore the brunt of the USDJPY sell-off after Japan’s consumer price index rose to a 40-year high and raised expectations of a hawkish Bank of Japan (BoJ) pivot that would put a bid under the Japanese yen. . A pullback in Treasury bond yields from the United States would cooperate with a U-turn in the US dollar and provide some support to gold prices.
On Thursday, the US dollar staged a solid rebound with US Treasury bond yields following hawkish remarks from US Federal Reserve (Fed) policymakers. St. Louis Fed President James Bullard said benchmark interest rates may need to rise as much as 7% to put downward pressure on inflation. “To achieve a sufficiently restrictive level, the policy rate needs to be increased further,” he said. Benchmark 10-year Treasury bond yields from the United States jumped from a six-week low to near 3.70%, trading at 3.76% as of writing.
The focus shifts to United States existing home sales data
Soft United States producer price index (PPI) and consumer price index (CPI) data from the United States raised expectations of a 50 basis points (bps) rate hike by the US Federal Reserve in December, another sign of a cooling US housing market. Can be added to the latest level in the US dollar. On Thursday, the number of building permits in the United States fell 2.4% to 1,526K, the lowest since June 2020, while housing starts fell 4.2% to 1,425k.
Friday will see United States existing home sales drop at 15:00 GMT, with a mild decline to 4.38M in October expected compared to the previous print of 4.71M. If the US data disappointed by a wide margin, it would reinforce expectations of a Federal Reserve slowdown in the pace of tightening. The resulting US dollar weakness could revive the rise in gold prices. However, with attention turning to next week’s Federal Reserve meeting minutes, end-of-week flows could keep gold bulls on edge.
Gold price technical outlook: Four chart
The gold price is trading lower while staying below the horizontal 21-simple moving average (SMA) at $1,771 in the four-hour time frame.
Downside risks remain intact between the current playing wedge pattern at 49.40 and the bearish Relative Strength Index (RSI).
To challenge the psychological $1,750 barrier, sellers now need a sustained break below the weekly low of $1,755, where the bullish 50-SMA joins. The next downside target is seen at the $1,740 round number.
On the upside, buyers should find acceptance above the 21-SMA to revive the uptrend. Rising wedge support-turned resistance at $1,794 will be next on their radars.