FX.co ★ Skull999 | XAU/USD, GOLD

Gold Daily Forecast As of this writing, XAU/USD is correcting lower to trade around $4,121, after touching an intraday high of $4,146. This move marks its lowest levels since June 5. Gold is consolidating after posting gains of 3.64% yesterday, as the USD and Treasury yields recovered after a massive drop driven by the outcome of the US midterms elections. Precious metals jumped 3.64% on Wednesday, while West Texas Intermediate (WTI) crude fell 8%. Traders expect the Democrats' victory in Congress to limit funding for US President Donald J. Trump's military intervention against Iran and force him to withdraw troops within nine months of starting the conflict. In addition, divided government reduces fiscal concerns because it makes it harder to pass tax cuts or stimulus bills. It favours buying Treasury securities and helps to keep yields down. In turn, the USD falls under downward pressure. In addition, Oil prices are falling, easing inflation fears. Thus, these factors push gold higher. The USD Index (DXY) measures the USD strength against a basket of six foreign currencies. On Thursday, the DXY index was quoted at 101.60. Meanwhile, it bounced off a session low of 101.20. On Thursday, the US 10-year yield rose to 4.89% from the previous low of 4.83%. WTI crude oil futures are currently up 1.65% at $89.50 per barrel. Market participants currently see a hawkish stance from the Federal Reserve (Fed) as the main obstacle to bullish Gold moves. Oil prices are far above the pre-war level, raising inflation risks. As the Fed continues to focus on its 2% inflation target, traders expect current elevated rates to persist longer and anticipate another hike in December. According to the CME FedWatch tool, the odds stand at 79%. Higher rates hurt the non-yielding asset by increasing the opportunity cost of holding the precious metal. In a speech on Thursday, Cleveland Fed President Beth Hammack reaffirmed a hawkish bias, saying "monetary policy needs to move to a restrictive stance" and that inflation has been "too high, moving in the wrong direction." She further argued that "gradual rate hikes are the best strategy to ensure the US Central Bank brings inflation down to 2%." Gradual rate hikes are relatively low-cost compared to the alternative strategies to achieve inflation objectives without disrupting economic activity. On US economic news, initial jobless claims came in at 189K, below the anticipated 196K. The figure is also lower than the previous 195K reading. The four-week moving average declined to 194.75K from a revised 197K. Traders are now waiting for the Non-Farm Payrolls release tomorrow. On the H4 chart, gold is under bullish pressure, while the yellow metal corrected briefly from the 4070 low and rebounded sharply. Gold isGold is now trading at 4121 under a bullish bias. However, the XAU/USD metal sustains an encouraging bias, having breached the 23.6% Fibonacci retracement of the August-to-October downmove and the 200-period Simple Moving Average (SMA) on the four-hourly chart. The RSI at 75.77 is in the overbought zone, while the MACD histogram rises with positive divergence. In this regard, there may be scope for upward momentum despite the overbought condition and a mature rally. From the buyers' perspective, bulls need to hold beyond the key resistance level of $4,186 to keep gains alive. If price holds and sustains above $4,186, the next significant resistance lies at $4,283. Once buyers surpass the 50% retracement target and 50-day resistance, $4,380 marks another major target; medium-term recovery could hold up the 38.2%-61.8% Fibonacci bands around $4,518-$4,695. In the alternative scenario, if price shows weakness, bears may find downside protection at $4,124, which coincides with the 200-period SMA level, and subsequently at the previous $4,065 level. Failure to hold above $4,065 exposes support toward $3,871, which marks a recent cycle low.