Gold (XAU/USD) shows moderate gains on Monday, reversing Friday’s losses, and consolidating last week’s recovery, with price action levels just below $4.100 and last week’s highs, in the $4,150 area on the bulls’ focus. Precious metals are drawing support from a weak US Dollar, as efforts towards a peace deal in the Middle East continue, and Oil prices remain steady near two-month lows.
The US Dollar is dropping across the board on Monday amid improved risk sentiment, following news reports of ongoing negotiations to reach a peace deal in Iran. US President Trump contributed to improve the market mood as he affirmed on Sunday that it is unlikely that hostilities against the Islamic Republic will resume if talks show progress.
Recent macroeconomic data, however, has been USD supportive. US Nonfarm Payrolls growth overshot expectations by a wide margin in October, paving the path for further Federal Reserve (Fed) tightening in December. Key Fed policymakers also supported that view following the NFP release on Friday. This is likely to keep US Dollar dips contained.
Technical Analysis: Gold bulls break the top of the bearish channel
XAU/USD trades at $4,094, after bouncing above the upper boundary of the downward-trending channel earlier in the day. The broader tone remains capped as spot gold stays well below the 200-day Simple Moving Average (SMA), but the daily Relative Strength Index (14) has stabilized around the 50 level, and the Moving Average Convergence Divergence (MACD) indicator has turned positive, highlighting a growing upside momentum.
Bulls are likely to meet resistance at the mentioned $4,150 area, which capped rallies on Friday. If this level gives way. the next targets are the early October highs around $4,230, and then the mid-September highs near $4,400.
On the downside, initial support is seen at the confluence of the broken trendline, at $ 4,050, Friday's low at $4,030, and the $4,000 psychological level. A bearish reaction below here negates the bullish view and brings the November 3 low near $3,900 and the Channel bottom, now at $3,825, into focus.
