Gold rebounds to $2,030 as US yields stretch lower

Gold recovered toward $2,030 after testing $2,020 earlier in the day. The benchmark 10-year US Treasury bond yield declined to its lowest level in three months below 4.16% after US data and helped XAU/USD gain traction.

Technical Overview

Nothing seems to change for Gold price technically in the near term, as its bullish bias is likely to remain in place.

The 14-day Relative Strength Index (RSI) indicator is inching higher above the midline, justifying the bounce in Gold price.

Further, the Golden Cross, as represented by the 50-day Simple Moving Average (SMA) and the 200-day SMA bullish crossover, remains in play.

Gold buyers need to find acceptance above the $2,050 psychological barrier on a daily closing basis to resume the uptrend toward the intial hurdle at $2,100. A sustained move above the latter will challenge all-time-highs of $2,144 once again.

On the flip side, the immediate support is seen at the $2,000 threshold should the Gold price correction regain traction.

The 21-day SMA at $1,995 wil then come to the rescue of Gold buyers. The last line of defense for Gold buyers is seen at the $1,990 round figure.

Fundamental Overview

Gold price is making a minor recovery attempt near $2,020 early Wednesday, replicating the move seen in Tuesday’s Asian trading. Risk sentiment appears to be in a tepid spot, underpinning the Gold price alongside a pause in the US Dollar upswing.

The US Dollar has stalled its two back-to-back days of recovery even though markets have turned cautious after Moody’s Investors Service downgraded its outlook on China’s government credit ratings to negative from stable. The rating agency, however, retained China’s “A1” long-term rating on the country’s sovereign bonds.

Also, uncertainty surrounding the US Federal Reserve (Fed) interest rate outlook tempers investors’ sentiment, especially after a mixed set of US economic data released on Tuesday.

The latest data from the Institute for Supply Management (ISM) showed that the Services PMI registered 52.7 in November, firming up from October's reading of 51.8. However, US JOLTS Job Openings slid to more than a 2-1/2-year low of 8.733 million in October, suggesting that labor market conditions are loosening further.

Markets continue pricing about 60% odds of a Fed rate cut in March but investors await Wednesday’s US ADP Employment Change data for placing fresh bets on the US Dollar and Gold price. The ADP is likely to show that the American private sector added 130K jobs in November, up from 113K jobs addition seen in October.

A smaller-than-expected increase in the US ADP jobs data could bolster dovish Fed bets, fuelling further downside in the US Dollar. In such a case, Gold price could extend its renewed upside toward $2,050. On the contrary, a souring risk sentiment and strong US jobs report could offer additional support to the ongoing US Dollar recovery, offering a fresh leg lower in Gold price.