Gold rebounds from key moving average, erases part of last week's drop

Falling Treasury yields are supporting gold's recovery.

Gold experienced a sharp decline on Friday driven by risk-off sentiment. Today, the focus has turned to lower Treasury yields, enabling gold to recover part of that drop.

The 10-year U.S. Treasury yield has fallen 5.0 basis points to 4.87%. Gold tends to gain from lower yields since it offers no interest; a lower bond return reduces the opportunity cost of holding bullion, enhancing its appeal.

The bounce is also aided by a successful test of an important technical support.

Buyers have supported gold at the 100-week moving average.

Gold tested its 100-week moving average at $3882.35 on the weekly chart. The session low dipped slightly below that level, but buyers stepped in and pushed prices higher.

Gold currently trades around $3968, slightly under the day's high of $3970.34.

The rebound underscores the significance of the 100-week moving average as a long-term indicator. As long as the price holds above this level, buyers who bought near it can remain active. A drop below would weaken the bounce and shift control back to sellers.

A reclaimed swing area offers nearby support.

Today's recovery has pushed gold back above the swing zone spanning $3942 to $3959. That area previously marked a series of swing lows between June 24 and July 17 before breaking down during Friday's selloff.

Returning above this zone is a constructive signal for buyers. They will now look for support to form in the $3942-$3959 range, with $3942 acting as the key risk-defining level on a close basis.

Staying above the area keeps the recovery intact. A fall back below would undermine the buyers' advance and leave the rebound more fragile.

Hourly moving averages represent the next upside hurdles.

The next resistance is the declining 100-hour moving average at $3997.31, close to the psychologically important $4000 mark. Beyond that is the falling 200-hour moving average at $4023.09.

To strengthen the bullish outlook, both moving averages must be broken and hold above. Gold has been trading under its 200-hour moving average since October 19, making that level a key point to watch.

For now, buyers have successfully defended the weekly support and recaptured the swing zone. The next objective is to consolidate by staying above $3942-$3959 and breaking through the hourly moving averages.