- Gold prices dropped to over a one-week low, trading around $1810 as the dollar strengthened on hawkish Fed comments about potentially tapering asset purchases later in 2021. - Gold witnessed wild swings the previous day but ended modestly higher, as the dollar weakened on disappointing jobs data but then rebounded on a strong services sector report. - Looking ahead, the Bank of England and US jobs reports could impact gold prices, with the Fed remaining focused on inflation and a potential tapering of support.

1. XAU/USD Off Highs, Steady
Around $1810

2. Points To Be Covered Today:
• XAU/USD Drops To Over One-week Lows
• Gold Price Witnessed Wild Swings
• Gold Price Is Trading Subdued
• Gold Price Chart - Technical Outlook
• Daily Technical Chart For Gold Price
• Gold Quantitative Outlook
• Gold Price Is Trading Almost Unchanged
• Gold’s Downside Is Capped
• Gold (XAU/USD) Prices Fail

3. XAU/USD Drops To Over One-week Lows
• A combination of diverging forces failed to provide any meaningful impetus to gold
on Thursday.
• The overnight hawkish remarks by Fed’s Clarida acted as a headwind for the non-
yielding metal.
• A modest USD weakness limited losses amid worries about rising Delta variant
COVID-19 cases.
• Risks appear skewed in favor of XAU/USD bears, NFP awaited
• Cautious market mood and US dollar’s strength keeps gold price side-lined.
• Investors digest hawkish Fed speak amid mixed US data, ahead of key NFP.
• Gold’s daily setup suggests choppy to range-bound trading.

4. Gold Price Witnessed Wild Swings
• Gold price witnessed wild swings on Wednesday and snapped its three-day
losing streak, ending the day with modest gains at $1812.
• In the first half of the day, gold price caught a fresh bid wave and rallied to
four-day highs of $1831.81 as the US dollar slipped on a disappointing ADP
jobs report.
• The US private sector added 330,000 jobs in July, well below expectations.

5. The Greenback Staged A V-shaped Recovery
• However, the greenback staged a V-shaped recovery after the US ISM
Services PMI jumped to a fresh record high of 64.1 in July vs. 60.4 expected.
• The resurgent dollar’s demand was also backed by Fed Vice-Chair Richard
Clarida’s hawkish comments.
• Clarida said that the central bank is likely to hit its economic targets by the end of
next year and start raising rates again in 2023.
• He also said that the Fed’s tapering could start as early as the end of this year.
Treasury yields spiked alongside the dollar and dragged gold price sharply lower
towards its recent range lows.
• Although, the Fed’s hawkish expectations-led drop in the US stocks helped gold
price to limit its declines.

6. Gold Price Is Trading Subdued
• Gold price is trading subdued at lower levels on Bank of England’s (BOE) Super Thursday,
clinging onto key support amid ongoing coronavirus concerns, China crackdown woes and
hawkish Fed speak.
• Immediate focus now remains on the BOE monetary policy announcements, with the
central bank likely to stand pat but may offer hints towards a potential tapering of its bond-
buying programme amid concerns over rising inflation.
• Any hawkish tilt from the BOE could dent the sentiment on the global stocks, lifting the
dollar further, in turn, negatively impacting gold. Also, of note remains the US Jobless
Claims and Fed official Waller’s speech for fresh incentives on gold price action.
• However, Friday’s US NFP release will set the tone for the market and gold’s direction.

7. Gold Price Chart - Technical outlook

8. Daily Technical Chart For Gold Price
• The daily technical chart for gold price shows a downside consolidative mode
is underway, as bears cling onto the critical 21-Daily Moving Average (DMA) at
$1811.
• Note that gold price has failed to close below the daily candlestick since July
27.
• Meanwhile, the 200-DMA at $1819 continues to challenge the bullish
commitments.
• Despite Wednesday’s spike, gold price failed to find acceptance above the
latter and turned south, keeping the bears hopeful.

9. Relative Strength Index (RSI)
• The 14-day Relative Strength Index (RSI) holds steady at the midline, suggesting that gold
traders remain indecisive of the next direction in prices.
• Although, the risks appear to the downside for gold price amid a looming death cross on
the daily time frame. The 50-DMA is fast approaching the 200-DMA, looking to pierce
through the latter from above.
• A sustained break below the 21-DMA support could expose the ascending 100-DMA at
$1804 and the psychological $1800 mark.
• Further south, the range lows around $1790 could be put at risk if the selling pressure
intensifies.
• Alternatively, recapturing the 200-DMA convincingly is likely to prompt a retest of the
bearish 50-DMA at $1822.
• Buyers will seek fresh entries to challenge Wednesday’s high en-route the $1840 round
number.

10. Gold Quantitative Outlook
• When analyzing option implied volatility to get a sense of market expectations, there is also
quantitative evidence supporting the technical setup and bullish view.
• The CBOE Gold Volatility Index (GVZ) currently stands at 14.88%, which implies a weekly
one standard deviation range of +/- $37.50.
• This certainly puts a move above $1834 within the realm of statistical probabilities, but also
leaves room for gold to trade towards the bottom of its recent range, should it break lower
and violate the $1805 level.
• Given this range of probable outcomes, how can we use volatility as a signal? When
looking at the relationship between volatility and price performance, there's a fairly strong
inverse correlation of -0.63 on a rolling 30-day basis.
• Meaning, at least for now, gold has a tendency to exhibit positive price performance amid
declining levels of volatility.

11. Gold Quantitative Outlook - I
• Though correlation is not causation, it’s often noted that capital tends to flow towards
assets with decreasing volatility and away from assets experiencing increasing levels of
volatility.
• Should gold vol remain stable or fall from here, it might lend further confidence to the
bullish thesis.
• Finally, two of the biggest factors that often influence the price of gold are interest rates
and the relative value of the dollar.
• While both nominal and “real” yields on 10 year U.S. Treasury notes have pushed lower
recently, it might be the dollar we want to keep a closer eye on for confirmation of gold's
pending move higher.
• Like many commodities, there's often an inverse correlation with the value of the dollar
(see table below).
• Should we see this relationship hold along with further dollar weakness, it’s one more box
we can check on the list of bullish signals.

12. Gold Price Is Trading Almost Unchanged
• Gold price is trading almost unchanged on the day, unable to hold at higher levels, despite
the latest pullback in the US dollar across the board.
• The cautious tone across the European markets fuelled the risk-off flows in the US
Treasuries, downing the yields alongside the dollar.
• At the time of writing, gold price trades at $1811, holding onto the critical 21-Daily Moving
Average (DMA) support.
• Gold traders remain cautious ahead of the BOE monetary policy decision, with a potential
tapering signal to drag gold price further southwards.
• A withdrawal of stimulus support from any of the central banks is unlikely to board well for
gold price. The US Jobless Claims and Fed speak will also hog the limelight after
Wednesday’s mixed economic data and Fed official Clarida’s hawkish turn.

13. Gold Prices Edge Lower
• After testing the high of $1,835 in the overnight session, gold prices edge
lower on Thursday.
• The US Treasury yields bounce off their lows following Fed’s official’s hawkish
comments.
• US Federal Reserve Vice-chair Richard Clarida signaled that the central bank
would be in a position to cut down its massive asset purchase program later
this year.
• In addition to that, three other policymakers also hinted at their approval to
start reducing the Fed’s bond-buying program, though their views differed on
the timings of the event.

14. Gold Prices Were Unable To Find Traction
• The US Dollar Index, which tracks the performance of the greenback against
the basket of six major currencies, remains strong above 92.20 on Fed’s
official comments and upbeat economic data.
• The ISM Non-Manufacturing Purchase Manager Index (PMI) jumped to 64.1
in July, well above market expectations of 60.5.
• Gold prices were unable to find traction after posting substantial gains on
Wednesday’s session following the dismal US ADP Employment data, which
showed that only 330K jobs were added in July.

15. Gold’s Downside Is Capped
• Meanwhile, the precious metal’s downside is capped as demand
emerges near the lower level amid rising concerns on the spread of
the Delta variant and its possible effect on global growth recovery.
• Investors remain hesitant to take a big position in the precious metal
ahead of Friday as focus shifts to US Non-Farm Payroll data, due on
Friday.

16. XAU/USD Daily Chart

17. Gold Prices Extended The Gains
• Gold prices extended the gains from the low of $1,750.77 made on June 29
and touched the high of $1,832.77 in the month of July.
• The August series started on a subdued note while swinging back and forth in
the narrow trade range of $1,800 and $1,830.
• The ascending trendline from the low of ascending trendline acts as a
defensive for the bulls.
• A break of the bullish slop line would intensify the selling pressure in the gold
prices.

18. Moving Average Convergence Divergence
• The Moving Average Convergence Divergence (MACD) remains
neutral near the midline.
• A downtick in the MACD indicator would confirm the downside
momentum.
• A sustained break below the $1,800 would make the journey toward
the south for the prices.

19. Gold (XAU/USD) Prices Fail
• Gold (XAU/USD) prices fail to extend Wednesday’s recovery moves
while taking rounds to $1,811-12 amid a quiet Asian session on
Thursday.
• In doing so, the yellow metal portrays cautious sentiment amid
fears of tapering and the Delta covid variant woes ahead of the
week’s important events, namely the Bank of England (BOE)
monetary policy meeting and the US Nonfarm Payrolls (NFP).

20. XAU/USD Off Highs, Steady
Around $1810

21. Thanks for listening
XAU/USD Off Highs, Steady Around $1810