2. Points To Be Covered Today:
• XAU/USD Surrenders Modest Intraday Gains, Flirts With $1,800 Mark.
• Fed's Latest Monetary Policy Update
• Gold Price: Key Levels To Watch
• Gold Poised For Extra Rangebound
• Gold Price Is Reversing
• Gold Technical Analysis
3. XAU/USD Surrenders Modest Intraday Gains, Flirts
With $1,800 Mark
• Gold price is back on the bids after defending key support around
$1798.
• Risk-off mood-driven sell-off in Treasury yields lifts gold price.
• Gold bears await break below 100-day SMA at $1,796.
• Gold struggled to capitalize on its modest intraday gains, instead met
with some fresh supply near the $1,811-12 region and has now
dropped to the lower end of its daily trading range.
• Currently hovering around the $1,800 round-figure mark, the
XAU/USD has been oscillating in a range over the past one week or so
and was influenced by a combination of factors.
4. Economic Fallout
• Worries about the economic fallout from the fast-spreading Delta variant of the coronavirus
weighed on investors' sentiment. This was evident from a generally weaker tone around
the equity markets, which acted as a tailwind for the safe-haven gold.
• The global flight to safety triggered a fresh leg down in the US Treasury bond yields, which
was seen as another factor that extended some support to the non-yielding yellow metal.
• In fact, the yield on the benchmark 10-year US government bond reversed a major part
the last week's move up to the 1.30% threshold.
• This, in turn, weighed on the US dollar and benefitted dollar-denominated commodities,
including gold. Despite the combination of supporting factors, the uptick lacked any follow-
through buying or bullish conviction and remained limited in the absence of a fresh
fundamental catalyst.
5. Fed's Latest Monetary Policy Update
• Investors also seemed reluctant to place any aggressive bets, rather preferred
to wait on the sidelines ahead of this week's key event risk – the FOMC
meeting starting Tuesday.
• The Fed's latest monetary policy update will play a key role in influencing the
greenback in the near term and provide a fresh directional impetus to gold.
• In the meantime, developments surrounding the coronavirus saga, the
broader market risk sentiment, the US bond yields and the USD price
dynamics will be looked upon for some short-term opportunities.
6. Gold Price Is Consolidating At Higher Levels
• Gold price is consolidating at higher levels on Monday, kicking off a big week on the right footing.
• Gold bulls are back in the game after having found solid support around the $1798 region.
• The downbeat market mood remains the key underlying theme so far, boosted the haven flows into
the US Treasuries and gold while weighing on the yields. The benchmark 10-year US Treasury
yields are down nearly 5% on the day.
• Escalating covid concerns and a tense start to the US-Sino trade talks dampen the investors’
sentiment. Additionally, worse than expected German IFO Survey for July intensified economic
growth concerns, underpinning gold price.
• However, it remains to be seen if gold price can sustain the upside, as markets bet on a hawkish
hint from the FOMC meeting this week. The Fed is widely anticipated to signal at a likely taper
starting off from the quarter of this year.
7. Gold Price: Key Levels To Watch
• The Technical Confluences Detector shows that gold has stalled its recent advance just below the powerful
resistance at $1812, which is the convergence of the Fibonacci 61.8% one-week, SMA10 one-day and pivot
point one-day R1.
• A firm break above that level will challenge the immediate upside barrier at $1814, the Fibonacci 38.2% one-
month.
• Further up, a dense cluster of healthy resistance levels is seen around $1823, where the SMA200 one-day,
the previous week’s high and Fibonacci 161.8% one-day coincide.
• On the flip side, gold price will test the $1806 support area, the intersection of the SMA200 four-hour and
SMA100 one-hour.
• Sellers will then target the confluence of the Fibonacci 38.2% one-week, SMA50 one-hour and Bollinger Band
four-hour Middle at $1803.
• The next relevant cushion is seen around $1798-$1797, which is the meeting point of the Fibonacci 23.6%
one-week, Fibonacci 38.2% one-day and Bollinger Band one-day Middle.
• The last line of defense for gold bulls is aligned at $1790, where the Fibonacci 23.6% one-month converges
with the previous day’s low.
9. Further Downside Looks Likely
• CME Group’s flash data for gold futures markets noted open interest
rose for the fourth consecutive session on Friday, this time by.
• Nearly 6K contracts.
• In the same line, volume reversed the previous drop and went up
by around 84.8K contracts.
10. Gold Poised For Extra Rangebound
• Prices of gold ticked lower at the end of last week amidst increasing open
interest and volume, leaving the door open for further retracement in the very
near term.
• The continuation of the current side-line theme looks likely with further gains
expected above the 200-day SMA, today at $1,822 per ounce troy.
12. XAU/USD Flirts With $1,800 As USD Weakens
• Gold is opening the week on the back foot as the US dollar stays firm.
• FOMC, covid, growth and inflation risk all point to a solid US dollar.
• Gold prices record a sudden uptick after opening below the $1,800 mark on
Monday morning.
• The rise in the price attributed to the fall in the US dollar index from the 93.00
mark.
• The general risk-off mood also boosted the demand for the precious metal.
13. XAU/USD Flirts With $1,800 As USD Weakens- I
• The concerns over the rapid spread of the coronavirus delta variant and its impact
on the pace of the economic recovery, creating room for the upside momentum in
the gold prices.
• The inflationary anxiety among investors also added to the attractiveness of gold.
• Market participants eagerly wait for the Federal Open Market Committee’s meeting
this week.
• Traders anticipate that the US central bank will keep the policy rates unchanged.
• The meeting will be followed by the comments from Fed Chair Jerome Powell. The
easing US Treasury bonds yields also supported the bullish momentum in the gold
prices.
14. Gold Price Is Reversing
• Gold price is reversing a dip below $1800 so far this Monday’s Asian trading, as the US
Treasury yields retreat heading into the FOMC week.
• The market sentiment is cautious, as investors gear up for a busy week, reflective of a
0.23% drop in the S&P 500 futures.
• China’s technology-sector crackdown seemingly weighs on the risk tone.
• All eyes remain on Wednesday’s FOMC meeting for any hint on tapering while the covid
updates and US Durable Goods Orders data will entertain traders in the meantime.
• Fresh developments on the US-China trade front also influence gold price, as both sides
for the first talks in months.
• Note that gold price is still holding onto the critical support around $1798, the confluence of
the 21 and 100-Daily Moving Averages (DMA), with a downside breakout imminent.
15. Gold Price Is Reversing - I
• The gold price on Friday ended lower by 0.26% in XAU/USD falling from a high of $1,810.37 to a
low of $1,789.69. XAU/USD was oscillating around the $1,800 psychological level for the most part.
• The US dollar notched a second week of gains following a number of volatile days pertaining to the
ebb and flow in risk appetite ahead of the Fed for the week ahead.
• The focus is on US data and inflation in the main.
• The Federal Reserve this week will be expected to indicate that tapering should emerge in 4Q this
year, with the possibility of a first hike coming in 4Q22.
• If 2Q21 GDP growth – expected at 8-9% quarter-on-quarter annualised – plus also June readings
for personal consumption and the PCE deflator, all arrive strong, the US dollar should continue to
prosper within the US dollar smile theory. Subsequently, this could weigh on the commodity
complex for the weeks ahead.
16. Gold Remains Vulnerable To Further Increases
• ''Gold remains vulnerable to further increases in real rates as both inflation and nominal rates normalize,'' analysts at
TD Securities said.
• The dollar index DXY, which measures the greenback against a basket of six major currencies, for the week, was up
0.1%, after rising 0.6% previously.
• We had seen a 3-1/2-month high in the DXY of 93.194 touched on Wednesday and should the market revisit there or
beyond, gold prices would be expected to fall further.
• The week ahead will also see the IMF release an interim update on its World Economic Outlook and there will be
specific interest in the concerns elsewhere in the world fuelled by the Delta variant.
• With this in consideration, the MSCI index which captures large and mid-cap representation across 27 Emerging
Markets (EM) countries, is down nearly 8% since June in the confluence of the rising US dollar and covid cases
around the world.
• The prospects of vaccine boost in developed nations could bring about additional concerns in EM's as vaccine
allocations start to dry up in the developing parts of the world.
• An exodus from EM’s would continue to be supportive of the greenback and a headwind for gold prices in the
meanwhile.
17. Gold Technical Analysis
• Technically, a bullish reverse head and shoulders are taking shape
on both the weekly and monthly charts.
• However, there could be some downside yet to come.
• A strong resistance between 1,811/30 has been in play and has
forced last week's weekly candle to close bearish.
• From a daily perspective, we are seeing a bearish H&S and the
price has been testing the neckline.
19. Gold Technical Analysis - II
• A bearish breakout below the neckline
(1,790) could eventually equate to a
weekly downside continuation and a
lower low for the weeks ahead.
• This leaves the daily lows of 1,750
ahead of 1,730 vulnerable.
• ''Trend following strategies are set to
add shorts below $1775/oz,'' analysts
at TD Securities said.
