Gold rallies above $5,070 as China treasury shift batters US Dollar

• Gold surges as China urges institutions to reduce US Treasury exposure, weakening the US Dollar.
• Bullion supported by steady PBoC buying, extending China’s reserve diversification trend.
• Focus shifts to NFP and CPI to assess a more or less dovish Fed outlook.

Gold price (XAU/USD) remains bid during the North American session on Monday following reports that Chinese authorities recommended institutions to reduce exposure to US Treasuries or pare down their positions due to increased volatility. At the time of writing, XAU/USD trades at $5.074, up 2.16%.

XAU/USD surges as reports of reduced Chinese Treasury exposure

Markets’ mood is mixed, with the Greenback extending its losses, pushing Bullion prices higher, due to be denominated in US Dollars. Also, US Treasury bond yields, which are inversely correlated to yields, remain unchanged after pairing previous gains.

Physical buying of the non-yielding metal is another factor pushing Gold higher, as the People’s Bank of China (PBoC) added Bullion to its reserves for the 15^th month in January. The debasement trade continues with more central banks diversifying from Dollar reserves to other assets.

Further bullish reasons, like expectations for further rate cuts by the Federal Reserve (Fed), are likely to weigh on the Dollar. This week’s January Nonfarm Payrolls report and the revisions for the employment data would be crucial in setting the path for interest rates

An upbeat jobs report could trigger a leg down in Gold prices if the markets priced in a less-dovish Fed. On the other hand, XAU/USD could accelerate its uptrend, yet traders would need to deal with Friday’s US Consumer Price Index (CPI) data.

Daily market movers: US Dollar weakness boosts Gold’s haven appeal

• The US Dollar Index, which measures the buck’s performance against a basket of six peers, is down 0.76% at 96.94. Conversely, steady US Treasury yields are capping Gold’s advance. The US 10-year T-note yield is flat at 4.208%.
• The New York Fed Survey of Consumer Expectations revealed that inflation expectations for one year dipped from 3.4% to 3.1% in January. For three- and five-year periods, it was unchanged at 3%.
• The Survey revealed that expectations for credit declined relative to December, while views of the labor market improved.
• Eyes turn to Fed officials crossing the wires. Fed Governors Christopher Waller and Stephen Miran, most likely remain dovish. Atlanta’s Fed President Raphael Bostic, who would be retiring this year, would stick to his hawkish stance as he said that inflation remains too high, closer to the 3% threshold.
• Money markets had priced in nearly 57 basis points of easing towards the year’s end, according to Prime Market Terminal data.

Technical outlook: Gold continues to consolidate, yet bulls are looming

Gold price is neutral to upward biased, with bulls remaining unable to clear the February 4 high near $5,100. However, it should be said that in the last six days, Bullion printed a higher low, an indication that prices seem to be at equilibrium and Gold to consolidate within the $4,800-$5,100 range.

If the top of the range is cleared, the next resistance would be $5,200, followed by the January 30 high at $5,451 and the record high near $5,600. On the flip side, a drop below $4,800 exposes the February 2 low of $4,402 ahead of the October 17 cycle high at $4,381.