Gold prices in terms of the US dollar (XAU/USD) stalled its recovery from multi-year lows and fell sharply on Thursday from three-week top printed at 1126.78. The pair lost upside momentum and dropped towards 5-DMA located near 1110 levels after yesterday’s PBOC yuan fix had negligible impact across the board as market begin to feel comfortable with the new China fx regime. However, XAU/USD witnessed more than $ 10 fall as the Sept Fed hike still stays alive amid fading PBOC yuan fix led uncertainties and upbeat US fundamentals – in line with estimates retail sales data.
XAU/USD opened lower on Friday and subsequently rallied to highs at 1155.95 just before the yuan fix announcement. However, the pair erased gains and fell back in the red after the Chinese central bank halted the yuan devaluation today after 3 consecutive days of declines. Hence, risk-on flows returned to markets, reducing the gold’s appeal as a safe-haven and boosting the greenback across the board. XAU/USD now trades lower at 1113.90, recovering a dip to 1111.85 lows. Looking ahead, a series of key economic data release from the US due to reported later today will confirm the recent strength in the US dollar, eventually impacting the yellow metal. US PPI, industrial production and consumer sentiment data will be closely watched.
Technicals – Clings to 5-DMA
XAU/USD edged lower and traded in a narrow range amid lack of fresh triggers in the Asian session as PBOC yuan fix turned out to be a non-event as anticipated. The pair forms a small doji candle on the daily charts with the RSI flattish around 49 suggesting lack of clear direction as markets await US economic news for further USD moves. XAU/USD clings to the bullish 5-DMA located at 1113.66 and holds comfortably above the upward rising 10-DMA located at 1100, also the key psychological levels. In the day ahead, if the upcoming data releases miss expectations than we could see a pullback in gold prices towards 1120 levels and beyond that the previous three-week highs at 1126.78 could be retest.
In case if the data sets beat expectations, Sept Fed rate hike bets would be further cemented, pushing XAU/USD pair towards the 10-DMA, below a break of daily lows at 1111.85. Overall, a generalized intraday downside bias is likely to persist as the USD bulls are expected to remain boosted on expectations of upbeat economic data flow and Sept Fed rate hike still in play.
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