The gold price failed to break above $1,800 despite the US dollar index weakening, as strength in the dollar and expectations of central banks tapering stimulus measures put pressure on gold. The document discusses factors influencing gold prices such as US dollar strength, holdings in gold ETFs, inflation levels, and signals from central banks like the Fed and ECB that they may begin tapering asset purchase programs. Technical analysis suggests the dollar index is testing a resistance level that could further weaken gold prices if breached.

1. XAU/USD Fails Around 1,800 Despite
The Broad Dollar's Weakness

2. Points To Be Covered Today:
• Gold Prices Have Been Pressured
• The US Dollar Index (DXY)
• The World’s Largest Gold-backed-ETF
• Gold Is Holding Up
• The Benchmark 10-year Treasury
• DXY & Gold Technical Analysis

3. Gold Is Under Pressure
• Gold is under pressure as investors back the
mighty US dollar.
• Global growth risks are fuelling a risk-off
environment which is supporting flow into
the greenback.
• The bulls are pawing near the weekly 38.2%
Fibonacci.

4. Gold Prices Have Been Pressured
• Gold prices have been pressured since the
beginning of the week after testing the highs
of $1,830.32.
• A fresh round of selling emerged when prices
slipped below $1,800 on Tuesday.
• Broad-based USD strength exerted pressure
on the precious metal.

5. The US Dollar Index (DXY)
• The US Dollar Index (DXY), stays strong near
93.00 with 0.22% gains and attracts inflows to
its safe-haven appeal.
• A higher USD valuation makes gold expansive
for the other currencies holders.
• Gold Holdings in SPDR Gold Trust, the world’s
largest gold-backed-ETF were little changed
for the third day at 998.52 tonnes.

6. The World’s Largest Gold-backed-ETF
• US President Joe Biden will present a six-
pronged strategy to fight the spread of the
Delta coronavirus variant.
• Hawkish comments from two Fed’s officials
also boosted the sentiment around the USD,
which kept the pressure on the gold prices.
• Meanwhile, the European Central Bank (ECB)
decision will be in focus to gauge the market
sentiment.

7. Gold Is Holding Up
• At the time of writing, the price of gold is
holding up in what has been a bearish weekly
correction to the day's lows of $1,782.47 so
far.
• XAU/USD has fallen from a high of $1,802.18
and is currently 0.13% lower at $1,792.11.
• Markets have soured on the eve of the next
major central bank meeting this week.

8. Gold Is Holding Up - I
• Due to the highest readings of inflation for
almost a decade, the European Central
Bank is expected to start to taper its asset
purchases and markets are bracing for such
an announcement tomorrow.
• This sentiment was first thrown up by Philip
Lane, at last month's Jackson Hole.

9. The Executive Board Of The ECB
• Lane is a Member of the Executive Board of
the ECB and he was advocating for
the calibration of the QE program to financial
conditions both in an upwards and in a
downwards direction.
• Lane was using the new all-time lows seen in
EUR real rates as an argument to tone down
PEPP-purchases, potentially as soon as this
month.

10. The Executive Board Of The ECB - I
• Markets jumped on this and have been toeing
a line of caution ever since, regarding the
message as the start of the process of
tapering.
• “The first P in PEPP stands for pandemic, not
permanent, and for a good reason,”
• Bundesbank President Jens Weidmann also
said last week, as hawks circle over the ECB.

11. US Dollar Catches A Safe-haven Bid
• The combination of central banks removing
stimulus, albeit slowly and with caution, the
spread of the coronavirus and the prospect of a
slowing economy has weighed on risk sentiment
this week.
• In turn, this has seen flows into the US dollar and
away from risk assets.
• Additionally, US yields had helped the greenback
along in its plight for a restest of the daily
counter-trend line in the DXY index this week,
(see DXY chart below).

12. The Benchmark 10-year Treasury
• The benchmark 10-year Treasury note rose as
high as 1.385% on Tuesday, its highest since mid-
July and a climb of almost 6 basis points from
Friday's close.
• The ten-year yield has been building a bullish
case since the August 2 double bottom:
• Rising yields would be expected to elevate real
yield higher also, which has been a headwind for
gold prices this year.

13. The Benchmark 10-year Treasury

14. The DXY Index
• The US dollar, as measured against a basket of
major peers in the DXY index, is trading 0.11%
higher on the day at 92.625.
• However, it had reached as high as 92.862 in the
New Yorks mid-morning session.
• Meanwhile, following last week's dismal Nonfarm
Payrolls, which meant that expectations of an
imminent taper were dialled back, Fedspeak has
been on the radar this week.

15. The US Consumer Confidence And
Jobs Data
• While both the US consumer Confidence and jobs
data were terrible in August, it came at the same
time as a new high in the spread of the Delta
variant.
• This leaves the bar low for an improvement in the
data should the nation get the spread under
control with its vaccination programme.
• This makes tomorrow's address to the nation by
the US president, Joe Biden, a critical event for
markets.

16. The Prospects Of A Hawkish
• In the same view, the markets could be
underestimating the prospects of a hawkish
September meeting, despite the NFP data.
• While the Fed will likely forgo announcing a taper
of stimulus at this month's policy meeting, wage
growth remains solid.
• This means that there is the potential for
inflationary pressures to steer the hand of the
Fed should the virus be contained with higher
vaccination rates in the coming weeks.

17. The Prospects Of A Hawkish - I
• Meanwhile, St. Louis Fed president James
Bullard recently told the Financial Times that
the central bank should go forward with a
plan to start trimming stimulus this year
despite the data.
• We have more recently heard from New York
Federal Reserve President John Williams
singing the same tune as his hawkish
colleague, Bullard

18. DXY & Gold Technical Analysis

19. DXY & Gold Technical Analysis - I
• The DXY is on the verge of a retest of the
counter trendline as follows:
• The bulls moved in on the 50% mean
reversion following a break back above the 50-
day EMA, the 20 and now the 10. This now
exposes the counter trendline resistance near
the 93 areas and a 61.8% golden ratio.
• For gold, such a move would be expected to
tip it to the edge of the abyss.

20. XAU/USD Fails Around 1,800 Despite
The Broad Dollar's Weakness

21. Thanks for listening
XAU/USD Fails Around 1,800 Despite
The Broad Dollar's Weakness