Weekly Market Analysis / 22 - 26 November 2021

Gold looks to extend rebound amid new covid variant

With the sharp upsurge witnessed in US Treasury bond yields, gold broke below the previous week’s trading range and continued to push lower in the first half of the week. After falling to its lowest level since early November at $1,778 on Wednesday, gold has staged a decisive rebound ahead of the weekend and settled near $1,800 but ended up closing the second straight week in the negative territory. 

  • Gold's inverse correlation with US Treasury bond yields stays intact.

  • Risk aversion ahead of the weekend helped the precious metal find demand.

  • Buyers managed to hold gold above several key SMAs.

What Happened Last Week

  1. The benchmark 10-year US Treasury bond yield gained traction during the American session on Monday and rose more than 5% on a daily basis. Additionally, US President Joe Biden announced that he had nominated Jerome Powell for a second four-year term as the Fed chair, cementing the view that the Fed could go for a rate hike by June 2022.

  2. On Tuesday, data published by IHS Markit revealed that the economic activity in the private sector continued to expand in early November, albeit at a softer pace than in October with the Composite PMI edging lower to 56.5 from 57.6.

  3. The US Bureau of Economic Analysis reported on Wednesday that the Core Personal Consumption Expenditures (PCE) Price Index climbed to 4.1% on a yearly basis in October from 3.7%.

  4. Following Thursday’s dull market action, gold surged higher Friday with investors shifting their focus to coronavirus headlines.

News to Follow

  1. The Conference Board’s Consumer Confidence data will be featured in the US economic docket on Tuesday. Investors will look for details surrounding the impact of high inflation on consumer sentiment.

  2. The ADP Employment Change and the ISM Manufacturing PMI on Wednesday will be looked upon for fresh impetus ahead of Friday’s November jobs report. Although a better-than-expected increase in Nonfarm Payrolls could provide a boost to the dollar, the market reaction could remain limited unless vaccine producers reassure markets that they will be able to handle the new variant.

  3. Before the Fed goes into the blackout period on Saturday, December 4, comments from FOMC policymakers will be critical as well. In case Fed officials refrain from suggesting that they will need to stay patient in the face of renewed coronavirus fears, US T-bond yields could regain traction and cap XAU/USD’s upside. On the other hand, gold could continue to gather strength if safe-haven flows continue to dominate the financial markets.

Short-Term Outlook

  • On the upside, XAU/USD could target $1,814, $1,824 and $1,838$.

  • First support now aligns at $1,789, $1,778 and $1,769.