XAU to Rise Versus US Dollar if Stock Market Rout Deepens

2021-11-17 20:00:00

Gold, XAU, US Dollar, Stock Market, Golden Cross– Talking Points

  • Gold prices remain firm on the week despite US Dollar resiliency
  • Bullion could see more upside if US stocks continue to decline
  • XAU/USD on track to see a Golden Cross formation occur

Gold prices remain firm going into the back-end of the trading week, with a pause in US Dollar strength and Treasury selling providing cover for more XAU upside. Traders moved back into bonds overnight amid a weak Wall Street session that saw small-cap stocks get hammered. The 10-year note’s rate fell back under the closely watched 1.60% level, while the US Dollar DXY index shed 0.11% overnight.

The yellow metal has seen considerable strength since last week’s US CPI print spurred further inflationary concerns in the economy. That move higher coincided with a stronger Greenback and Treasury yields – two things that typically weigh on the non-interest-bearing metal. However, bullion also holds appeal among traders as an inflation and volatility hedge, which may explain the recent price action.

Given the lack of potential high-impact events on the calendar through the remainder of the week, gold may hold its current calculus. Moreover, further losses in the stock market are likely to fuel volatility and push traders into safe-haven Treasuries. That market behavior would bode well for prices and lower the risk of a stronger US Dollar derailing recent gains.

Gold Technical Forecast

Gold prices have gyrated around the 1860 mark over the last handful of sessions following a sharp move higher last week. The recent upside has dragged the 50-Day Simple Moving Average (SMA) higher, putting it on a collision course with the longer-term 200-day SMA. An intersection of these two high-profile moving averages would complete a Golden Cross formation, which may see a subsequent rise in prices given the bullish nature of the signal.

Gold Daily Chart

gold chart, golden cross, westwater, xau, gc

Chart created with TradingView

— Written by Thomas Westwater, Analyst for DailyFX.com To contact Thomas, use the comments section below or @FxWestwater on Twitter

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