• Gold clings to strong recovery gains on Wednesday.
  • Renewed USD weakness helped XAU/USD gain traction in American session.
  • Benchmark 10-year US Treasury bond yield is down 2%.

Update: Gold (XAU/USD) struggles to extend the strongest rebound in three months near $1,750 during a subdued start to Thursday’s Asian session. The yellow metal benefited from the US dollar weakness, as well as risk-on mood the previous day before a lack of major directives limited the commodity’s moves.

The latest sideways moves ignore Bloomberg’s update suggesting Janet Yellen’s first China visit as the US Treasury Secretary as well as a mild recovery in the Aussie covid infections. It’s worth noting that a light calendar in Asia restricts the market moves of late.

Gold rose the previous day as the US Consumer Price Index (CPI) data for July confirmed the Fed’s “transitory” outlook and dragged the US Dollar Index (DXY) down for the first time in four days, despite initially refreshing multi-day top. The USD’s pullback also took clues from the Fed Reserve Bank of Kansas City President Esther George’s comments suggesting the time has come for tapering but the policy normalization is far from here.

Amid these plays, Wall Street closed mostly higher but S&P 500 Futures struggle for clear directions. Additionally, US 10-year Treasury yields also refrain from extending the previous day’s downside around 1.33%.

 

After suffering heavy losses at the start of the week, the XAU/USD pair closed virtually unchanged on Tuesday and managed to stage a decisive rebound on Wednesday. As of writing, gold was up 1.4% on the day at $1,753.

The renewed USD weakness in the second half of the day helped XAU/USD preserve its bullish momentum. The US Bureau of Labor Statistics reported that the Consumer Price Index (CPI) stayed unchanged at 5.4% on a yearly basis in July. Additionally, the publication revealed that the Core CPI, which excludes volatile food and energy prices, edged lower to 4.3% from 4.5%. The US Dollar Index is currently down 0.2% on a daily basis at 92.88.

Commenting on the inflation report, Dallas Fed President Robert Kaplan noted that CPI numbers were consistent with the Federal Reserve's inflation outlook. "The Fed still expects a broadening of inflation pressures into the next year," Kaplan added. "The Fed has to be attentive to inflation continuing to run above 2%."

On a hawkish note, Kansas City Federal Reserve President Esther George argued on Wednesday that the time has come to dial back the settings on the monetary policy but this comment failed to help the USD find demand.

In the meantime, falling US Treasury bond yields seem to be helping gold gather additional strength. The benchmark 10-year US Treasury bond yield, which closed in the positive territory in the previous five trading days and gained more than 10%, reversed its direction on Wednesday. With the 10-year note auction posting a high yield rate of 1.34% on strong demand, the 10-year US T-bond yield is down 2% at 1.318%.

On Thursday, the weekly Initial Jobless Claims and the Producer Price Index (PPI) data from the US will be looked upon for fresh impetus.

Gold technical outlook

Currently, gold remains on track to close above $1,750, which acted as strong support earlier in summer. The next hurdle aligns at $1,760 (static level) and XAU/USD could extend its rebound toward $1,785 if buyers manage to lift the price above that resistance. However, the Relative Strength Index on the daily chart is still below 40, suggesting that the recent recovery could still be seen as a technical correction rather than a reversal of short-term direction.

On the flip side, $1,730 could be seen as the first significant support on the downside before $1,720 (August 10 low) and $1,700 (psychological level). 

Additional levels to watch for

XAU/USD

Overview
Today last price 1751.59
Today Daily Change 22.71
Today Daily Change % 1.31
Today daily open 1728.88
 
Trends
Daily SMA20 1800.69
Daily SMA50 1812.02
Daily SMA100 1804.16
Daily SMA200 1817.03
 
Levels
Previous Daily High 1738.33
Previous Daily Low 1717.87
Previous Weekly High 1831.81
Previous Weekly Low 1758.79
Previous Monthly High 1834.17
Previous Monthly Low 1765.74
Daily Fibonacci 38.2% 1725.69
Daily Fibonacci 61.8% 1730.51
Daily Pivot Point S1 1718.39
Daily Pivot Point S2 1707.9
Daily Pivot Point S3 1697.93
Daily Pivot Point R1 1738.85
Daily Pivot Point R2 1748.82
Daily Pivot Point R3 1759.31

 

 

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