XAU/USD Bulls Eyeing A Move Beyond 200-DMA

1. XAU/USD Bulls Eyeing A Move Beyond 200-DMA

2. Points To Be Covered Today:
• Gold Price Forecast
• Sudden Pick Up In The US Dollar
• US Dollar Stood Tall
• Technical Outlook
• Gold Suffered A Dip Below
• Gold Is Battling The Critical Resistance
• What Lies Ahead For Gold
• Gold Technical & Fundamental Overview

3. Gold Price Forecast
• COVID-19 jitters assisted gold to gains traction for the second straight session
on Tuesday.
• A goodish rebound in the equity markets/US bond yields might cap gains for
the commodity.
• US stimulus optimism, Delta fears to boost XAU/USD’s recovery.
• Gold added to its modest intraday gains and climbed to fresh daily tops,
around the $1,825 region heading into the North American session.

4. Gold Price Forecast - I
• Investors remain worried about the potential economic fallout from the spread of
the highly contagious Delta variant of the coronavirus.
• This continued benefitting the safe-haven precious metal and helped offset a
goodish rebound in the equity markets.
• Meanwhile, doubts about the growth outlook, along with diminishing odds for an
imminent Fed action in the near future, led to an extension of the overnight steep
decline in the US Treasury bond yields.
• In fact, the yield on the benchmark 10-year US government bond fell below the
1.16% threshold for the first time since February 2021 and provided an additional
boost to the non-yielding gold.

5. Sudden Pick Up In The US Dollar
• That said, a sudden pick up in the US dollar demand might act as a headwind
for dollar-denominated commodities and cap gains for gold.
• Even from a technical perspective, bulls are likely to wait for a sustained
strength beyond the very important 200-day SMA before positioning for a
move to retest monthly swing highs, around the $1,834 area touched last
Thursday.
• The momentum could further get extended to the $1,845-46 region, en-route
the next major hurdle near the $$1,866 zone.

6. Previous Update: Gold
• Previous update: Gold built on the previous day's bounce from the $1,795 region, or
one-week lows and edged higher for the second consecutive session on Tuesday.
• The XAU/USD held on to its gains through the early European session and was last
seen hovering around the $1,815 area, up nearly 0.15% for the day.
• Worries about the economic fallout from the spread of the highly contagious Delta
variant of the coronavirus was seen as a key factor that extended some support to
the safe-haven gold.
• That said, a combination of factors kept a lid on any meaningful upside for the
commodity, at least for the time being.

7. US Dollar Stood Tall
• The US dollar stood tall near the highest level since February and acted as a
headwind for dollar-denominated commodities, including gold.
• Apart from this, a generally positive tone in the equity markets, along with a solid
rebound in the US Treasury held bulls from placing any aggressive bets around the
non-yielding yellow metal.
• The downside, however, remains cushioned amid diminishing odds for an imminent
Fed action in the near future. In fact, the Fed funds futures showed that the chances
of a 25bps hike by the US central bank in December 2022 fell to 58% on Monday
from 90% on July 13.

8. Major Market-Moving Economic Releases
• In the absence of any major market-moving economic releases from the US,
gold remains at the mercy of the broader market risk sentiment and
developments surrounding the coronavirus saga.
• Traders will further take cues from the US bond yields, which might influence
the greenback and produce some short-term trading opportunities around the
XAU/USD.

9. Technical Outlook
• Gold last week faced rejection near the very important 200-day SMA. The mentioned barrier is currently
pegged near the $1,825 region, which should now act as a key pivotal point for short-term traders and help
determine the next leg of a directional move.
• A sustained strength beyond will set the stage for an extension of the recent strong bounce from the $1,750
zone and push the XAU/USD beyond monthly swing highs, around the $1,834 region touched last Thursday.
• The momentum could further get extended to the $1,845-46 region, en-route the next major hurdle near the
$$1,866 area. Some follow-through buying should pave the way for additional gains, allowing bulls to surpass
the $1,880 level and aim to reclaim the $1,900 round figure.
• On the flip side, dips below the $1,800 mark might continue to attract some dip-buying near the $1,795-90
region. A sustained breakthrough might be seen as a fresh trigger for bearish traders and prompt some
aggressive technical selling.
• The XAU/USD might then fall to the $1,775 support area, which if broken decisively will shift the near-term
bias back in favour of bearish traders. The next relevant support is pegged near the $1,762-60 area before
gold eventually dropping to retest June monthly swing lows, around the $1,750 region.

10. Gold Suffered A Dip Below
• Gold suffered a dip below $1,800 on Monday but recovered quickly, trading around
$1,815 early on Tuesday. US stimulus optimism and Delta fears are set to
boost XAU/USD’s recovery, in the view of FXStreet’s Dhwani Mehta.
• See – Gold Price Forecast: XAU/USD to find support from negative real yields and
inflation fears – ANZ
• US stimulus news lifts gold, technicals favor bullish traders
• “The focus will remain on the risk trends and dynamics in the greenback and the
yields for near-tern trading opportunities.
• The second-tier US housing data could throw some fresh light on the economy and
the Fed’s next policy moves.”

11. Gold Is Battling The Critical Resistance
• “Gold is battling the critical resistance at $1818 on its recovery mode. That
level coincides with the confluence of the 21-Simple Moving Average (SMA)
and 50-SMA.
• Acceptance above $1818 could trigger a fresh advance towards the 200-DMA
at $1825. Further up, the three-week highs of $1834 could be back in play.”
• “An immediate cap is seen at the horizontal 50-SMA at $1812, below which
the descending trendline resistance now support, now at $1808 will get tested.
• A sustained break below that level could expose the mildly bullish 100-SMA at
$1798.”

12. Gold (XAU/USD) Edges Higher
• Gold (XAU/USD) edges higher around $1,817, up 0.26% intraday, heading
into Tuesday’s European session.
• In doing so, the yellow metal prints the highest daily gains in a week as
market pessimists pause for fresh clues.
• However, the firmer US dollar, backed by a pause in the US Treasury yields’
south-run near the five-month low, test the gold buyers.
• It’s worth mentioning that the hopes of passage of the US infrastructure
spending bill, ahead of its procedural voting on Wednesday seem to
consolidate the market sentiment.

13. XAU/USD Was Ending Flat
• At the time of writing, gold is a touch lower in Asia at $1,811.11 following a trip to the downside early in the US session.
• There was a round turn overnight between a low of $1,795.12 and a high of $1,817.42 as gains in the USD eased.
• After all that, XAU/USD was ending flat on the day despite that risk-off tone that weighed heavily on the likes of silver prices and
currencies, such as the commodity-linked AUD.
• Worries about the Delta variant has been supporting the greenback and weighing on equities as well as commodities at the
start of this week.
• The energy complex was probably the worst off due to the concerns about a third global wave in Covid.
• The August WTI contract fell by a whopping $5.32 (7.4%) while the Sep Brent contract fell by $4.89 (6.6%). Oil was a major
contributor to the drop in the CRB index that ended down over 3%.
• The Vix is also back above 20, soaring to a fresh daily high of 24.78 from 19.27 the low. The S&P 500 was down over 1.5%. The
US 10-year was 11.5bps lower at 1.176%.
• Consequently, DXY was up for the third straight day and it had traded at its highest level since April 5 near 93, not far off the
March 31 and YTD high near 93.437.

14. What Lies Ahead For Gold?
• The dollar smile theory could be significantly bearish for gold prices going forward.
• As analysts at ANZ Bank explained, ''despite the vaccine rollout, markets do not appear to
be embracing the idea of learning to live with COVID-19. Sentiment appears to have
shifted, at least for the moment, to persuasion that growth and earnings expectations may
be overdone.''
• Meanwhile, the number of new infections is rising in southeast Asia and most US states as
well with the highly infectious Delta variant taking hold.
• There lies within prospects for continuous risk-off for the foreseeable future.
• There are significant concerns that the worst is yet to come from the delta variant,
especially considering how unprepared the US potentially is.

15. What Lies Ahead For Gold - I
• While weekend reports have centred around the UK's conundrum in that it had tallied 54,674 new
coronavirus cases on Saturday, the biggest one-day increase since January, and 41 new deaths,
just as it intends to remove lockdown restrictions, the US's problem is moving to the forefront.
• The average number of infections per day have been tripling in the past 30 days in the United
States, according to an analysis of Reuters data.
• Reuters wrote, ''deaths, which can lag weeks behind a rise in cases, rose 25% last week from the
previous seven days with an average of 250 people dying a day.''
• ''COVID-19 outbreaks are occurring in parts of the country with low vaccination rates. About one in
five new cases is in Florida, and the vast majority of people hospitalized for COVID are
unvaccinated.''
• Meanwhile, the UK's full vaccination rate for 50-65-year-olds are around 86% but they are only 66%
for the US and that’s a big difference. This US could be a fertile breeding ground for the delta
variant.

16. What Lies Ahead For Gold - II
• At some stage, should the USD suffer a significant exodus of investment pertaining to the spike in covid, gold would be
expected to benefit, especially considering the Fed would be less pressured to hike rates sooner than later.
• However, the immediate concern for markets is whether we are going to see a slowdown in the global economic recovery.
• This could be the overriding force that results in strong demand for the greenback, especially as all current data points to
a hawkish theme at the Fed.
• ''Since the FOMC last met, the labour market, Retail Sales and inflation have all come in very strong. While the rise in
COVID cases is a valid concern, there is a risk that the market is becoming too dovish on its expectations for the Fed’s
communication next week,'' analysts at ANZ Bank said.
• This completes the thesis that the US dollar smile theory is real and a headwind for gold prices for the foreseeable
future.
• Analysts at Brown Brothers Harriman described the theory as ''strong US data are feeding into increased dollar
bullishness as the Fed continues to take tentative steps towards tapering... On the other hand, growing risk-off impulses
are helping the dollar recently.
• This supports the view that the greenback is likely to benefit in either situation. Hence, the smile as the dollar turns up at
both ends of the risk spectrum.''

17. Gold Technical Overview

18. Gold Technical Overview - I
• Gold last week faced rejection near the very important 200-day SMA. The mentioned barrier is currently pegged near
the $1,825 region, which should now act as a key pivotal point for short-term traders and help determine the next leg of
a directional move.
• A sustained strength beyond will set the stage for an extension of the recent strong bounce from the $1,750 zone and
push the XAU/USD beyond monthly swing highs, around the $1,834 region touched last Thursday.
• The momentum could further get extended to the $1,845-46 region, en-route the next major hurdle near the $$1,866
area. Some follow-through buying should pave the way for additional gains, allowing bulls to surpass the $1,880 level
and aim to reclaim the $1,900 round figure.
• On the flip side, dips below the $1,800 mark might continue to attract some dip-buying near the $1,795-90 region. A
sustained breakthrough might be seen as a fresh trigger for bearish traders and prompt some aggressive technical
selling.
• The XAU/USD might then fall to the $1,775 support area, which if broken decisively will shift the near-term bias back in
favour of bearish traders. The next relevant support is pegged near the $1,762-60 area before gold eventually dropping
to retest June monthly swing lows, around the $1,750 region.

19. Gold Fundamental Overview
• Gold built on the previous day's bounce from the $1,795 region, or one-week lows and edged higher for the second
consecutive session on Tuesday. The XAU/USD held on to its gains through the early European session and was last
seen hovering around the $1,815 area, up nearly 0.15% for the day.
• Worries about the economic fallout from the spread of the highly contagious Delta variant of the coronavirus was seen as
a key factor that extended some support to the safe-haven gold. That said, a combination of factors kept a lid on any
meaningful upside for the commodity, at least for the time being.
• The US dollar stood tall near the highest level since February and acted as a headwind for dollar-
denominated commodities, including gold. Apart from this, a generally positive tone in the equity markets, along with a
solid rebound in the US Treasury held bulls from placing any aggressive bets around the non-yielding yellow metal. The
downside, however, remains cushioned amid diminishing odds for an imminent Fed action in the near future. In fact,
the Fed funds futures showed that the chances of a 25bps hike by the US central bank in December 2022 fell to 58% on
Monday from 90% on July 13.
• In the absence of any major market-moving economic releases from the US, gold remains at the mercy of the broader
market risk sentiment and developments surrounding the coronavirus saga. Traders will further take cues from the US
bond yields, which might influence the greenback and produce some short-term trading opportunities around the
XAU/USD.

20. Gold Fundamental Overview - I

21. XAU/USD Bulls Eyeing A Move Beyond 200-DMA

22. THANKS FOR LISTENING
XAU/USD Bulls Eyeing A Move Beyond 200-DMA