Gold Technical Analysis: Gold Gains Momentum, USD Stalls

Gold futures settled sharply higher since yesterday, with the US dollar declining and bond yields falling after the Bank of England decided to intervene in the bond market by purchasing long-term UK government bonds to address the dysfunction in the gold market.

  • Gold price recovered to the resistance level of $1662 an ounce.
  • The price of XAU/USD gold fell to its lowest level in 29 months to the support level of $1614 an ounce.
  • The hawkish comments from several Fed officials lifted the US dollar to its highest level in two decades.

The US dollar index, which rose to 114.78 to 112.59 this afternoon, was last seen at 112.77, down 1.17% from the previous close. The yield on the benchmark 10-year note fell 22.9 basis points to 3.735%. Accordingly, gold prices recorded their highest closing since September 22nd.

Bond Sales Postponed

The Bank of England's move comes as bond yields surged in the UK market after the government unveiled its mini budget including unfunded tax cuts. The Bank of England said purchases would be made at "any volume necessary" to restore orderly market conditions. In addition, the Bank of England postponed the sale of bonds held under the quantitative easing program to October 31. The sale was scheduled to start next week.

After falling sharply over the past several sessions, US stocks showed a significant recovery during trading on Wednesday. All major indices showed strong moves to the upside, with the Dow and the S&P 500 bouncing off their closing lows since late 2020.

Major US stock indexes retreated from session highs as the close approached but maintained significant gains. The Dow Jones rose 548.75 points, or 1.9 percent, to 2,9683.74, the Nasdaq rose 222.13 points, or 2.1 percent, to 11,051.64, and the Standard & Poor's 500 rose 71.75 points, or 2.0 percent, to 3,719.04.

The rally on Wall Street reflected a positive reaction to the Bank of England's plans to temporarily start buying long-dated UK government bonds to address the dysfunction in the gold market. Stocks also benefited from a significant decline in the US dollar, with the US dollar index down 1.2%. The dollar recently reached its highest level in 20 years.

Gold price forecast today:

Undoubtedly, the recent move in XAU/USD gold prices is important for the bulls’ return to control the trend and breaking the 1675 and $1700 resistance levels. I still prefer buying gold from every bearish level. There is a clear confusion in global financial markets and investor sentiment amid the policies of global central banks to contain record inflation, in addition to the consequences of the Russian-Ukrainian war, which took an unexpected turn.

The price of gold will be affected today by the level of the US dollar, following the announcement of the growth rate of the US economy, the number of weekly jobless claims, and the extent to which investors take risks or not.

Ready to trade our Gold prediction today? Here’s a list of some of the best XAU/USD brokers to check out.

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Mahmoud Abdallah
Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.

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