XAU/USD heading towards 2020 record high

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XAU/USD Current price: $2,036.15

• Surprising dovish comments from US Federal Reserve officials hit the US Dollar.
• US Treasury bond yields extend their slide to fresh multi-week lows.
• XAU/USD soared on broad US Dollar weakness could extend the rally towards $2,075.

Gold prices extended gains on Tuesday, with XAU/USD trading as high as $2,038.45 after Wall Street’s opening, currently holding nearby. The US Dollar has remained under selling pressure since the day started, accelerating its slump following comments from Federal Reserve (Fed) Governor Christopher Waller, delivering some dovish words.

Waller said the recent slowdown in economic activity is encouraging, as it may indicate that the monetary policy is tight enough to contain inflation. Furthermore, Wall said that if inflation continues to fall for several more months, the central bank could lower the policy rate.

 Beforehand, Chicago Fed President Austan Goolsbee said overall, there has been progress on inflation, noting that “it’s been coming down, it’s not yet down to target but 2023 we’re on path to set the highest drop in the inflation rate in 71 years.”

Finally, and retaining the hawkish stance, Fed Governor Michelle Bowman noted another rate hike is still possible, particularly if inflation progress stalls.

The majority shift from the usual hawkish message from Fed officials pushed Treasury yields further down. Currently, the 10-year government note offers 4.36%, while the 2-year note yields 4.80%, both down on the day.

XAU/USD short-term technical outlook

The XAU/USD pair maintains the upward pressure and could reach higher highs in the near term. The daily chart shows that technical indicators aim firmly north within positive levels, with the Relative Strength Index (RSI) indicator already within overbought levels. At the same time, the bright metal soared beyond directionless moving averages, with the 20 Simple Moving Average currently at around $1,980.

Gold is firmly bullish in the near term. The 4-hour chart shows technical indicators aim north almost vertically, standing at extreme levels yet without signs of upward exhaustion. Meanwhile, the 20 SMA has accelerated north well below the current level, while above bullish 100 and 200 SMAs, reflecting strong buying interest. The main bullish target for XAU/USD is $2,074.87, the August 2020 monthly high.

Support levels: 2,048.20 2,062.90 2,074.90

Resistance levels: 2,021.40 2,005.70 1,991.45

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