Gold Price Analysis – XAU/USD bears stepping in at a critical resistance zone

• Gold meets resistance and there are prospects of a significant correction. 
• US dollar pressured by falling US Treasury yields. 

Gold prices were elevated again on Thursday as the US dollar dipped to a fresh low on the back of sliding US yields. 

At the time of writing, XAU/USD is trading at $1,754.55 having popped from a low of $1,733.26 to a high of $1,758.72 on the day.

US Treasury yields were losing ground again due to the fresh dovish comments from Federal Reserve Chair Jerome Powell.

Also, worse-than-expected initial jobless claims that highlighted the economy’s bumpy recovery from the pandemic threw cold water over the US dollar’s bullish performance of late. 

The data showed that initial claims for state unemployment benefits totalled a seasonally adjusted 744,000 for the week ended April 3, compared with 728,000 in the prior week. Continued unemployment claims though fell to 3.73 million for the week of March 27.

Meanwhile, at an International Monetary Fund event on Thursday, Fed’s Powell said a surge in spending as the US economy reopens, along with bottlenecks in supply, will likely push prices higher this year, but would not result in the kind of yearly price increases that would constitute inflation.

The 10-year US Treasury yield dropped to a fresh low of 1.6280% and was ending on Wall Street down some 2.64%. 

Fed’s Powell’s remarks followed the cautious Federal Open Market Committee minutes on the March policy meeting released on Wednesday whereby various participants noted that changes in the path of policy should be based primarily on observed outcomes rather than forecasts. 

Gold technical analysis

In the above daily chart, the price is now testing a critical resistance area and has developed a new support structure. 

A close above the support today opens the prospects of a higher high, but the price could well find its self consolidating in coming sessions and trapped between resistance and support. 

From a 4-hour perspective, there are prospects of a 50% mean reversion to prior resistance as follows: