Bears remain in control of gold price amid a strengthening US dollar
- Gold price remains within the bear market amid pressure from the strengthening US dollar.
- Rising COVID-19 cases in the US and Europe are offering support to the metal, which is still above $1,700.
- Gold is on range-bound trading as US 10-year treasury yields decline by 1.05%.
Gold price remains under pressure as the US economy continues on its course to full recovery. On Monday’s session, the precious metal was down by 0.36% to trade at 1,726.47. In comparison, the dollar index was up by 0.07% at 92.80.
While the price is on a consolidation pattern, it is still trading close to its highest level since November 2020. Notably, a strengthening US dollar creates an unfavourable environment for gold price. However, the easing of the US treasury yields has offered some support to gold price. On Monday, the 10-year bond yields were at 1.655, down by 1.05%. This is a drop of about 1.0 from the record high hit in mid-March.
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Besides, the rising COVID-19 cases have maintained gold’s attractiveness as a safe haven. Johns Hopkins University has indicated that the US recorded 77,339 additional cases on Friday. This was an increase of over 10% on the 7-day average. On Thursday last week, the number of hospitalized individuals rose back to over 40,000 after falling below this important mark for the first time in 5 months. Furthermore, the third wave of the disease has had a significant impact on Italy, France, Netherlands, Germany, and the continent at large.
For investors looking to trade gold, the value of the precious metal is likely to experience additional pressure from the proposition of an additional $3 trillion spending package. If the proposal gains approval from the US lawmakers, it will facilitate the continued recovery of the US economy and further strengthening of the greenback.
Gold Price Technical Outlook
Gold price outlook remains bearish as it continues to trade within the descending channel. On a 2-hour chart, the price is below the short-term 50-day exponential moving average and the long-term 200-day EMA. For as long as the metal trades below the long-term EMA, the bearish outlook will remain.
Over the past two weeks, gold price has been within a range of between 1,721 and 1,747. As it continues to experience pressure from the strengthening US dollar, the range-bound trading will continue. On the upper side, it is likely to find resistance around 1,750. A move past this point will validate an uptrend. On the other end, its support level will be at $1,720. If it manages to breakout on the downside, the bears will test 1,700.