Gold Price Forecast: XAU/USD rebounds as US yields turn to the downside
- XAUUSD rises more than $10 from monthly lows.
- US yields retreat after ADP data, DXY turns negative.
- Stocks in Wall Street fail to hold to gains.
Gold prices are modestly down on Wednesday but off lows. During the American session, XAU/USD rebounded from the one-month low at $1709 and rose to $1723. It is hovering around $1720.
The rebound in gold is preventing a daily close under $1715 which would be a negative technical development suggesting more losses ahead, targeting $1700. Below the next level to watch is the July low at $1680. The immediate resistance on the upside is located at $1725; above the bearish pressure would ease.
Yields down
US yields are now falling on Wednesday. Following the August ADP employment report, the demand for Treasuries rose. The employment numbers came in below expectations with the private sector adding 132K jobs versus the 288K of market consensus. On Thursday the ISM Manufacturing is due and on Friday, the Non-farm payroll (consensus: 300K).
The US 10-year yield peaked at 3.16%, the highest level in two months and then pulled back to 3.10%; the 2-year yield retreat from the highest since 2007 at 3.49% to 3.43%. The decline in yields weakened the greenback, helping XAUUSD. The US Dollar Index falls 0.35% on Wednesday and is back under 108.50. The DXY continues to move sideways, holding between 108.00 and 109.00.
Despite the move lower in yields, the doors for a 75 basis points rate hike from the Federal Reserve are still open. Also, despite the rebound, the primary trend in XAU/USD is still bearish.