- Gold was seen consolidating in a range through the early North American session.
- Hawkish Fed expectations underpinned the USD and capped gains for the metal.
- Stagflation fears helped limit any meaningful slide for the safe-haven commodity.
- Gold Price Forecast: XAU/USD remains exposed to downside risks ahead of a big week
Gold lacked any firm directional bias and seesawed between tepid gains/minor losses, just above the $1,750 level through the early North American session. A combination of diverging forces failed to provide any impetus and led to a subdued price action following Friday’s turnaround from the post-US jobs data highs to the $1,781 region, or over two-week tops.
The disappointing headline NFP print was largely offset by an upward revision to the previous month's reading. Moreover, a fall in the unemployment rate to the lowest level since March 2020 reaffirmed market expectations that the Fed remains on track to begin tapering its bond purchases later this year. This continued acting as a tailwind for the US dollar, which, in turn, undermined the dollar-denominated commodity.
Meanwhile, the markets have also been betting on the possibility of an interest rate hike in 2022 amid worries that the recent surge in crude oil/energy prices will stoke inflation. This was reinforced by elevated US Treasury bond yields, which was seen as another factor that weighed on the non-yielding gold. In fact, the yield on the benchmark 10-year US government bond shot to four-month tops on Friday, around 1.612%.
That said, expectations for a faster than expected rise in inflation comes amid signs of a slowdown in the global economic recovery and have been fueling fears of a return of stagflation. This, in turn, tempered investors' appetite for perceived riskier assets and extended some support to the safe-haven gold. It, however, remains to be seen if bulls are able to capitalize on the move amid holiday-thinned liquidity conditions.
Investors might also refrain from placing aggressive bets ahead of this week's important releases, including the US consumer inflation figures and the FOMC meeting minutes on Wednesday. Apart from this, the US monthly Retail Sales figures on Friday will influence the near-term USD price dynamics and provide a fresh directional impetus to gold.
Technical levels to watch
From current levels, any subsequent move up is likely to confront stiff resistance near the $1,770 area. Some follow-through buying has the potential to lift gold prices back closer towards the $1,783-84 horizontal barrier. A sustained strength beyond should allow bulls to aim back to reclaim the $1,800 round-figure mark.
On the flip side, the $1,750 area now seems to have emerged as immediate strong support. A convincing break below might prompt aggressive technical selling and accelerate the slide towards September monthly swing lows, around the $1,722-21 region. Gold could eventually drop to test the $1,700 mark en-route August monthly swing lows, around the $1,687 region.
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