XAU/USD bears poke 200-EMA amid Coronavirus fears, US NFP, Fed Chair Powell eyed

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  • November 28, 2022
  • Gold price snaps four-day uptrend, pressured around intraday low of late.
  • Coronavirus fears amplify risk-aversion as China keeps reporting record-high numbers.
  • Cautious mood ahead of the key data/events also underpins the XAU/USD weakness.
  • US Dollar stays firmer even as Treasury bond yields remain weak.

Gold price (XAU/USD) drops nearly half a percent around $1,750 as bears cheer the first daily negative in five during early Monday. The yellow metal’s latest weakness could be linked to the market’s risk-off mood, as well as the US Dollar’s mild gains.

Markets in the Asia-Pacific region are in the red, led by China, as the Coronavirus fears escalate in the dragon nation amid record-high daily infections and protests over the government’s Zero-Covid policy. The reason could be linked to the alleged fire that killed around 10 people in Shanghai as they couldn’t leave the building because it was partially locked down, per the rumors spread on the internet.

“Infections rose as hundreds of demonstrators and police clashed in Shanghai on Sunday night as protests over China’s stringent COVID restrictions spread to several cities,” mentioned Reuters. The news also quotes China’s National Health Commission as it stated, “China reported a fifth straight daily record of 40,347 new COVID-19 infections on Nov. 27, of which 3,822 were symptomatic and 36,525 were asymptomatic.”

It’s worth noting that the recently downbeat comments from the European Central Bank (ECB) Governing Council Member Gabriel Makhlouf also allowed the US Dollar to cheer remain firmer. That said, the US Dollar Index (DXY) prints mild gains around 106.40 by the press time.

The risk-off mood could also be witnessed by the downbeat performance of the S&P 500 Futures, as well as five basis points (bps) of a decline by the US 10-year Treasury bond yields to 3.65%.

Given the sour sentiment, the Gold price may witness further downside. However, a softer yield may stop the XAU/USD bears ahead of the key data/events. Among them, a speech from the Federal Reserve (Fed) Chairman Jerome Powell and the United States’ monthly employment data for November, up for publishing on Thursday and Friday respectively, will be crucial for gold traders to watch. The reason could be linked to Powell’s first appearance since the latest Fed meeting.

Should Mr. Powell hesitate in conveying his routine hawkish comments, as well as the US jobs report ease, the Gold price may witness recovery.

Technical analysis

Be it the failure to cross a two-week-old descending trend line or a U-turn from a downwards-sloping resistance line from November 18, the Gold price called back the bears amid the market’s pessimism.

Also favoring the XAU/USD sellers are the bearish MACD signals, as well as the downbeat but not oversold RSI (14).

However, the 200-EMA level surrounding $1,747 challenge the metal’s immediate downside, a break of which could quickly drag the metal prices towards weekly horizontal support near $1,733.

Meanwhile, Gold buyers may initially confront the aforementioned resistance lines around $1,756 and $1,760 before highlighting the November 18 swing high near $1,768.

In a case where the Gold price remains firmer past $1,768, the monthly high near $1,787 will be in focus.

Overall, the Gold price returns on the bear’s radar but may remain there for a short time.

Gold: Hourly chart

Trend: Limited downside expected