Gold Price Analysis: XAU/USD fails attempted rebound back above $1,800 level as US data, Fedspeak loom

The fact that spot gold (XAU/USD) has thus far this Monday failed to sustain attempts at breaking to the north of its 21 and 200-day moving averages, both of which sit between the $1,798 and $1,800 levels, may prove a bearish signal. The precious metal was battered last week as US real and nominal yields surged in the lead up to and aftermath of a resoundingly hawkish Fed minutes release, with spot prices cratering from highs at $1,830 to under the big figure. For now, the precious metal is content to trade in the mid to low $1,790s and at current levels just under $1,795 it only trades lower by about 0.1% on the day. Lackluster trading conditions in the spot gold market reflect subdued trading conditions in US bond markets and the fact that though the US dollar is firmer on the day, it continues to trade well within recent ranges and well below recent highs.

But market strategists have been warning of the very real risk that hawkish Fed vibes return as the dominant market driver again this week, meaning upside risks to US real yields and the US dollar (and downside risks for gold). Wednesday sees the release of the December US Consumer Price Inflation report which will probably see headline inflation go above 7.0% YoY and Core inflation move above 5.0% YoY. That, coupled with last Friday’s December labour market report which showed further declines in the unemployment rate, a further hotting up of wage growth and improvement in other measures of slack, will have strengthened the Fed’s conviction that prompt monetary tightening in 2022 is appropriate.

Fed members including Fed Chair Jerome Powell and Vice-Chair Lael Brainard will have the opportunity to orate this week and react to the latest labour market report. Powell and Brainard will be speaking at their nomination confirmation hearings on Tuesday and Thursday respectively. Other US data worth watching include the December Retail Sales report and the University of Michigan’s preliminary January Consumer Sentiment survey, both out on Friday. Ultimately, if the dollar can regain some composure and rally above 2021 highs (which are around 97.00 for the DXY) and if US real yields can continue their recent push back towards zero, this signals further losses for gold. Key levels of near-term support to watch are the December $1,750 low and the September lows just above $1,720.