|premium|

Gold Price Forecast: XAU/USD remains confined in a range amid Fed taper talks, COVID jitters

  • Gold posted its first weekly loss in the previous five amid stronger USD/rallying US bond yields.
  • COVID-19 woes weighed on the risk sentiment and extended support to the safe-haven metal.
  • The market focus now shifts to this week’s key US macro data – CPI report and Retail Sales data.

Gold edged higher during the first half of the trading action on Friday, albeit continued with its struggle to find acceptance or build on the momentum beyond the $1,800 round-figure mark. The XAU/USD posted its weekly loss in the previous five and was pressured by a combination of factors. Despite the dismal US jobs report for August, investors seem convinced that the Fed would begin rolling back its massive pandemic-era stimulus sooner rather than later. This was evident from a solid rebound in the US Treasury bond yields, which helped revive demand for the US dollar and acted as a headwind for the dollar-denominated commodity.

In fact, the yield on the benchmark 10-year US government bond jumped closer to the 1.35% threshold following the release of US Producer Price Index (PPI) figures. The headline PPI rose 0.7% in August, down from a 1% increase in the previous month. The core PPI, which excludes volatile food and energy prices, climbed 0.3% during the reported month against a 0.9% gain in July. On a yearly basis, the PPI recorded the largest gain since the data was first collected in November 2010. The data indicated that higher inflation could persist for some time and reinforced hawkish Fed expectations. This was seen as another factor that weighed on the non-yielding yellow metal.

Hence, the market focus now shifts to this week's release of the latest US consumer inflation report, scheduled for release on Tuesday. Apart from this, the US monthly Retail Sales figures will also be looked upon for a fresh directional impetus. In the meantime, the risk-off impulse in the markets assisted the traditional safe-haven precious metal to regain some positive traction during the Asian session on Monday. Investors remain worried about the fast-spreading Delta variant and a global economic slowdown. This, along with reports that US Democrats were considering proposals to raise taxes on corporations and the wealthy, further contributed to the cautious mood.

Short-term technical outlook

From a technical perspective, the range-bound price action witnessed over the past four trading sessions constitutes the formation of a rectangle and points to indecision among traders. Moreover, neutral technical indicators haven't been supportive of any firm near-term direction and further warrant some caution before placing aggressive bets.

However, the recent pullback from the $1,832-34 supply zone and repeated failures near the $1,800 mark favours bearish traders. Some follow-through selling below the $1,785-84 region, or the lower boundary of the trading range, will reaffirm the negative outlook and set the stage for a deeper retracement to the $1,750 level. The XAU/USD could further extend the downward trajectory towards the $1,729-28 region before eventually dropping back to the $1,700 round figure.

On the flip side, the $1,800 level now seems to have emerged as immediate strong resistance and is closely followed by the very important 200-day SMA, currently around the $1,810 region. A sustained move beyond might prompt some short-covering move and lift the metal back towards the $1,832-34 strong barrier. Some follow-through buying will be seen as a fresh trigger for bullish traders and lift the commodity further towards the $1,853 intermediate resistance en-route the $1.868-70 region.

fxsoriginal

Premium

You have reached your limit of 3 free articles for this month.

Start your subscription and get access to all our original articles.

Subscribe to PremiumSign In

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

More from Haresh Menghani
Share:

Editor's Picks

AUD/USD stalls rebound above 0.7050 amid fresh Mideast tensions

AUD/USD stalls its rebound from almost two-month lows and treads water near 0.7050 in Asia on Monday, as the US Dollar pauses following Friday's upbeat US NFP-led blowout rally to a two-month high. However, renewed geopolitical tensions, along with surging bets on Fed rate hikes, continue to act as a tailwind for the USD, capping the higher-yielding Aussie.

USD/JPY holds higher ground toward 160.50 despite 'Yentervention' fears

USD/JPY holds higher ground toward 160.50 in Monday's Asian trading, despite intervention fears. Japan’s revised GDP print, which confirmed that the economy lost momentum in the first quarter, weighs on the Japanese Yen. Meanwhile, Friday's upbeat US NFP report and fresh Israel-Iran attacks favor the US Dollar bulls, underpinning the currency pair.

Gold stays vulnerable near $4,300 on Mideast woes, Fed rate hike bets

Gold remains vulnerable near $4,300 in early Europe on Monday, following a modest Asian bounce to the $4,350-$4,355 area. Renewed hostilities in the Gulf push Crude Oil prices higher, fanning inflationary concerns and bolstering bets for more hawkish central banks. That weighs negatively on the Gold, as it mires in three-month lows.

Dogecoin: Smart money flees DOGE, exposing a 12% downside risk

Dogecoin price hovers around $0.0850 at press time on Monday, keeping steady after a 5% rebound the previous day from the February 6 low at $0.08000. On-chain data show that large-wallet investors with 100 million to 1 billion DOGE have reduced their holdings to a five-month low, providing the downside pressure.

Week ahead – Fed countdown begins amid US inflation data and geopolitical risks

Fed Chair Warsh’s first meeting approaches as key US inflation data could reshape expectations. Oil prices remain elevated as US-Iran talks continue; tariffs also return to the spotlight. ECB is expected to hike; will it be a one-off move or is July live?

The US economy defies the rules: 100 days into the Oil shock and the recession signal is still missing

More than three months after the start of the Iran war and the resulting disruption to global energy markets, the US economy continues to display remarkable resilience. The conflict has triggered a sharp rise in Oil prices, reignited inflationary pressures and fueled widespread concerns about a potential economic slowdown.