Gold Price Analysis: XAU/USD wavers around $1,900 on USD recovery

• Gold snaps two-day uptrend, bounces off intraday low.
• Strong US inflation expectations join stimulus hopes to propel the greenback.
• US Treasury yields lack upside momentum, stock futures stay mildly positive.
• Sino-American tension, covid headlines can entertain traders ahead of the key Thursday.

Gold (XAU/USD) buyers take a breather around $1,900, down 0.16% while bouncing off intrday low of $1,894.57, after a two-day upswing ahead of Tuesday’s European session. Although doubts over the US Federal Reserve’s (Fed) future moves put a safe-haven bid under the precious metal, the US dollar’s rebound favors gold sellers of late.

US Inflation expectations are the key…

Even US Treasury Secretary Janet Yellen said higher rates are “good” for the Fed, US inflation expectations, per St. Louis Fed data, drop to the lowest since late April, mainly due to the downbeat jobs report published on Friday.

With the receding risk of inflation in the US, market players are optimistic for Thursday’s headline Consumer Price Index (CPI) for May, expected 4.7% versus 4.2% prior. Though, a strong print of the Fed’s preferred gauge of inflation, namely the Core PCE (personal consumption expenditures price index), tests the greenback buyers, which in turn keeps the gold prices upbeat.

Other than the inflation fears, chatters over US President Joe Biden’s infrastructure and spending plan, as well as the US-China tussles, also help the US dollar index (DXY) to pick up bids for the first time since Thursday, up 0.10% intraday by the press time.

Additionally, a comparatively stronger US recovery from the pandemic versus doubts over the unlock in the UK and Europe also likely to have put a bid under the US currency and snatched the rush to risk-safety from gold.

It’s worth noting that the pick-up in domestic demand from China, one of the world’s largest gold consumers, also back the yellow metal buyers. However, doubts over Indian recovery from the pandemic, another key user of gold, test the bulls.

Amid these plays, US 10-year Treasury yields remain depressed around 1.56% whereas stock futures trim early Asian gains by the press time.

Moving on, a light calendar keeps gold traders directed towards the risk appetite-related headlines for fresh impulse. Though, cautious optimism could help the XAU/USD to stay positive, barring the US dollar remains compressed.

Technical analysis

Gold prices step back from a one-week-old trend line resistance amid the most bearish MACD signal, suggesting further downside below the $1,900 threshold.

However, 21-day SMA and an ascending support line from March 31, respectively around $1,878 and $1,863, become crucial levels to watch during the commodity’s extended fall.

Should the bearish impulse stretch below $1,863 on a daily closing basis, the monthly low near $1,856 and early May’s top near $1,845 should return to the charts.

Meanwhile, a bullish move beyond the adjacent resistance line, at $1,900, needs a fresh high of the month above $1,917 to justify drive towards October 2020 peaks near $1,933 and the yearly high close to $1,960.

To sum up, gold prices remain strong but the bulls seem to wait for a strong upside push ahead of important data/events of the week.

Gold daily chart

Trend: Bullish

Also read...

Gold Weekly Forecast: XAU/USD snaps four-week winning streak, closes below $1,900

Gold is bearish and looking for a drop