- Gold started the new week with a bearish gap.
- XAU/USD could retest $1,800 as bullish momentum weakens ahead of key resistance levels.
- Risk aversion is likely to help USD continue to gather strength.
The XAU/USD pair started the new week with a bearish gap as the risk-averse market environment provided a boost to the greenback. Reflecting the broad-based USD strength, the US Dollar Index reached its highest level since early April at 93.03 during the Asian trading hours and made it difficult for gold to stage a rebound.
In the absence of high-tier data releases, the market mood turns sour amid heightened concerns over the quick spread of the coronavirus Delta variant dampening the global economic recovery. On Friday, the data from the US revealed that the University of Michigan's Consumer Sentiment Index dropped to 80.8 in July's advanced reading from 86.5 in June. Moreover, the 1-year Inflation Outlook component of the survey jumped to its highest level in nearly 13 years at 4.8% from 4.2%.
Despite the USD's upbeat performance, however, falling US Treasury bond yields seem to be helping gold limit its losses for the time being. The benchmark 10-year US Treasury bond yield is currently at its lowest level in five months at 1.182%, down 8.6% on a daily basis.
On Tuesday, Housing Starts and Building Permits figures for June will be featured in the US economic docket. These data are unlikely to have a significant impact on risk sentiment and XAU/USD could come under renewed bearish pressure in the near term if the USD continues to capitalize on safe-haven flows.
Gold technical outlook
On the daily chart, the Relative Strength Index (RSI) indicator holds near 50, suggesting that the recovery is struggling to gather momentum.
On the downside, the initial support is located at $1,800 (psychological level, Fibonacci 50% retracement of April-June uptrend) ahead of $1,793 (100-day SMA). A daily close below the latter could open the door for additional losses toward $1,770 (Fibonacci 61.8% retracement).
On the other hand, strong resistance aligns in the $1,825/$1,820 (Fibonacci 38.2% retracement, 200-day SMA) area. In case buyers lift the price above that hurdle, technical buying pressure could ramp up and gold could target $1,835 (50-day SMA).
Additional levels to watch for
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