XAU/USD Prediction As Yellow Metal Cuts Its Losses Against the Dollar

Summary:

XAU/USD is clawing back against a consolidating US dollar amid cooling US Treasury yields, but what are the chances of turning green?

XAU/USD shed some of the gains it made in the London mid-morning session on Wednesday, as investors react to marginal rises in US Treasury yields and a possible truce in the Middle East. Spot gold was at $2,033, down -0.14%, at 12:05 GMT. The April contract at COMEX was down 0.70% at $2,050.

News of a possible truce between Israel and Hamas has cooled down fears over possible escalation, to the detriment of safe haven gold. The two factions are reportedly nearing a deal, although Israeli Prime Minister Benjamin Netanyahu maintains that the war won’t stop until Israel achieves its objectives.

In the medium term, however, the geopolitical landscape is likely to favour gold. More than 60 countries, including the United States, the European Union, and South Africa, the leading gold producer, will be heading to the polls in 2024. Ultimately, this will likely trigger a myriad of geopolitical waves that could propel gold prices up as investors seek safe havens.

Elsewhere, the yellow metal could leverage reduced pressure from the dollar to reverse its recent losses. The dollar index was trading at 104.01, a drop of 0.12% from Wednesday’s opening price. However, a DXY figure above 100 generally points to a strong dollar. Nonetheless, yesterday’s loss of -0.30% could provide momentum for more downward action. Furthermore, statements by Federal Open Market Committee (FOMC) members are unlikely to deflect away from last week’s stance. This, and the absence of impactful US economic data today will likely see the dollar continue its consolidation.

Technical Analysis

The RSI is around the 50% mark, sending a neutral signal, with a possibility of marginal movements in either direction. This momentum will likely hold the price around the $2,028 pivot level, with the first resistance likely to come at $2,041. Beyond that point, $2,046 will likely be within reach. However, if the price breaches $2,028, XAU/USD could head down to $2,022, possibly finding the second support at $2,014.