The XAU/USD pair (gold prices in terms of the US dollar) finally gave a symmetrical triangle breakout to the upside on closing basis on Friday and rose sharply higher to fresh 3-month highs at 1159.71, before retracing slight at close near 1156 levels. The prices rallied to fresh tops after the dovish Fed minutes triggered a renewed US dollar sell-off. The Fed minutes turned out to be mixed and markets almost believed that Fed rate-hike this year is out. Thus, smashing the US dollar across the board and bolstering the non-interest bearing gold. Moreover, the solid performance witnessed in the commodity-space, with base-metals and oil prices rallying, also lifted the sentiment around the yellow metal.
At the moment, XAU/USD leaps to 1166.73, recording a 0.88% gain so far, as the continued weakness in the greenback and firmer commodity prices boost the bullion to the highest levels seen since August 24. Moreover, gold also got a lift from the CFTC COT report released on Friday. The report showed that the hedge funds and money managers raised their bullish bets in COMEX gold and silver to four-month highs in the week ended Oct. 6. In the day ahead, the prices are expected to remain buoyed amid low volumes as the Japanese, US and Canadian markets remain closed on their respective public holidays.
Technicals – Aiming higher to conquer 200-DMA
On daily charts, the pair jumps higher for the second straight session, after opening slightly below Friday’s close at 1155.81. The prices remain strongly bid and now targets the upside barrier at 200-DMA (1177.25), above the immediate resistance at 1170-1171.60 (Aug 24 High & Fib 127.20% retracement of the Sept 24-Oct 2 decline) amid thin trading today. A failure to break beyond the last, the prices could revert towards the daily lows of 1154.87, below which floors would open for a test of 1150 levels, which represents the confluence zone of the symmetrical triangle resistance-turned support and the bullish 5-DMA. However, the downside appears limited as the daily RSI heads north around 64 and points towards further advances.