Risk-off flows dominated financial markets on Tuesday, with the US Dollar appreciating further against most major rivals. XAU/USD fell to $1,815.19, its lowest since early March, as investors fear additional rate hikes in the US.
On the one hand, different Federal Reserve (Fed) officials remarked on Monday that inflation remains too high and repeated at least one more rate hike would be needed to keep price pressures under control. Additionally, officials reiterated rates should remain higher for longer.
On the other, the United States (US) Bureau of Labor Statistics (BLS) reported that the number of job openings on the last business day of August stood at 9.6 million, much higher than the 8.8 million anticipated and signalling a still tight labor market.
Government bond yields sky-rocketed while stock markets plummeted, reflecting renewed fears. The 10-year Treasury note yielded as much as 4.79%, its highest in over sixteen years, while the 2-year note offers 5.13%.
XAU/USD short-term technical outlook
XAU/USD bounced from the aforementioned low but trades in the red. The daily chart shows that it posted a lower high and a lower low and fell for a seventh consecutive day, with technical indicators consolidating at extreme oversold levels, yet without any other sign of downward exhaustion. At the same time, the bright metal develops far below all its moving averages, with the 20 Simple Moving Average (SMA) heading south almost vertically at around $1,900 and reflecting the strong selling momentum.
The 4-hour chart shows that XAU/USD retains its bearish bias as technical indicators resume their slides after a modest bullish correction. Still, the Relative Strength Index (RSI) indicator holds below its 30 level while the Momentum hovers at multi-month lows. Finally, the 20 SMA heads firmly lower, far above the current level and below the longer moving averages. A strong static support level comes at $1,804.70, February monthly low, with a break below the level anticipating a continued decline in the near term.
Support levels: 1,815.20 1,804.70 1,792.10
Resistance levels: 1,833.35 1,845.20 1,858.30