Gold Price Analysis: XAU/USD retreats below $1,750 as Sino-American tension escalates
- Gold fades bounce off $1,719.70, drops for second consecutive day.
- US-China squabbles from Alaska join reflation fears but vaccine hopes seem to help S&P 500 Futures to print mild gains.
- BOJ, updates from Alaska and bond yields are the key.
Gold refreshes intraday low to $1,732.60 while snapping the late Thursday’s corrective pullback ahead of Friday’s Tokyo open. The yellow metal took a U-turn from a fortnight high the previous day, before marking the heaviest losses in two weeks, as market sentiment soured on strong US Treasury yields. Although reflation fears seem to have propelled the yields earlier, Sino-American tussles in Alaska seem to be the latest catalyst weighing the quote.
Washington stays firm over geopolitics…
Be it terming the Chinese delegation in Alaska as looking for grandstanding or warning North Korea, the US keeps its dominance over geopolitics under Joe Biden's presidency. US Secretary of State Antony Blinken and Defence Secretary Lloyd Austin have been tough on China and North Korea, not to forget Iran, during their first foreign visit as American diplomats. However, neither China nor North Korea stepped back and hence the tussles become a head-to-head fight with nobody clearly winning but rather roiling the market mood.
Read: China Foreign Min. Jeichi: US abuses concepts of national security to threaten future of international trade
Also challenging the sentiment could be the US Federal Reserve policymakers’ discomfort in no rate hike before 2024 amid strong economics. Even if the Fed tried to tame the bond bears in its latest meeting, global market players spot multiple challenges to the board members’ consent.
Alternatively, vaccine optimism returns to the table as the European Medicine Authority (EMA) said AstraZeneca is safe while the World Health Organization (WHO) is also likely to reiterate its support for the British-Swedish vaccine on Friday. It should, however, be noted that the jabbing rate is lower in Asia than in the West and may hinder hopes of faster global economic recovery.
Against this backdrop, the US 10-year Treasury yield eases from the highest since January 2020, marked the previous day, whereas the S&P 500 Futures print 0.14% intraday gains by the press time.
Looking forward, global market players seek more clues on the geopolitics and reflation to confirm the yellow metal’s further weakness.
Technical analysis
21-day EMA and a falling trend line from January 06, currently around $1,745, guards the commodity’s immediate upside.