- Gold remains under pressure despite recovering from intraday lows.
- Tighter USD weighs on the metal but sluggish markets await new clues.
- US durable goods orders for May, weekly jobless claims are key in a new direction.
- Covid updates, US stimulus and Fedspeak are also becoming important.
To update: Gold continued its struggle to build on the week's modest gains and has fluctuated within a range for the last three trading sessions. Currently trading below the $ 1,780 mark, the prevailing risk appetite was seen as a key factor that acted as a headwind for safe haven gold. That said, a modest spike in US Treasury bond yields continued to help limit the upward trend in unprofitable gold. However, a softer tone around the US dollar extended some support for the dollar-denominated commodity and helped limit the downside.
In fact, the major USD index has cut some of last week's FOMC-inspired strong gains to its highest level since April 9 amid mixed signals on US inflation. Fed chair Jerome Powell said Tuesday that inflation should rise due to pent-up supply and demand bottlenecks and that price pressures should ease on their own. Separately, Atlanta Fed President Raphael Bostic and Fed Governor Michelle Bowman said that high inflation in the US would last longer than expected, but agreed that the price spike will prove temporary.
The combination of forces deterred investors from placing aggressive bets and resulted in subdued / range-bound price action in the first half of Thursday's trading. Market participants are now looking forward to a series of key US macro data that will give new impetus later during the early North American session. This, along with US bond yields and a planned speech by New York Fed President John Williams, will affect USD price dynamics and create some near-term trading opportunities around the XAU / USD.
Previous Update: Gold (XAU / USD) shows the indecision of the market with a 0.23% intraday loss near USD 1,773, despite recently bouncing off the daily low and entering Thursday's European session. Chatter about Fedspeak and US President Joe Biden's infrastructure spending plan is omnipresent, while fears about the Delta Plus Covid variant are also favoring gold sellers. However, a lack of clear direction and an easy calendar leaves traders waiting for the new catalyst to have a better view of the markets.
Following Fed Chairman Jerome Powell's affirmation that inflation risks are temporary and do not call into question current Fed policies, Eric Rosengren, President and CEO of the Federal Reserve Bank of Boston, expects “most price increases to reverse by next year close". In the same vein came comments from Treasury Secretary Janet Yellen, who said, "Most measures of inflation expectations remain well anchored."
On the contrary, the President of the Atlanta Federal Reserve, Raphael Bostic, and the President of the Dallas Fed, Robert Kaplan, remained restrictive on the Fed's next steps, but received fewer awards.
Meanwhile, US Senators are in a rush to get President Joe Biden's infrastructure spending off of a two-week holiday period, but there is a big difference between the Democratic push and the Republican demands. Therefore, the standstill weights market sentiment and places a bid below the US dollar.
It's worth noting that China's warning to the U.S. about warships in the Taiwan Straits didn't stop the Biden government from restricting exports to five Beijing companies, adding to risk-taking. In addition, fears of the Covid variant in the US are gaining momentum again, as an epidemiologist warns of the rise in cases this fall. The Delta Plus variant of the coronavirus (COVID-19) recently postponed the UK unblocking period and is the main concern of the UK government given the recent 41% increase in daily cases.
In the absence of key data / events, gold traders are looking for new clues from US durable goods orders for May which was expected at 2.7% versus -1.3% previously. Additionally, headlines about the virus and the US stimulus linked to the Sino-US clashes can also provide a strong clue as to the price of gold.
Gold justifies Wednesday's bearish doji below the 100-day SMA (DMA) to target a four-month-old horizontal support near $ 1,960. However, any further weakness will require a daily close below $ 1,755, including mid-March highs, to keep sellers hopeful.
Should the price stay below USD 1,755, the low of April 13 near USD 1,745 and the threshold of USD 1,700 could serve as a stop during the south run to the annual low of USD 1,675.
Meanwhile, an upward revision of 100-DMA, around $ 1,793, is confirmed from the round $ 1,800 before targeting the early May swing high near $ 1,845.
However, gold's uptrend above $ 1,845 will have a bumpy path starting at $ 1,855 and ending when the commodity closes above $ 1,910.
In summary, gold sellers, while holding the reins, are not in full control and therefore need new catalysts to represent a crucial step.
Gold: daily chart
Trend: further weakness expected
Liquidity circus and Fed gold
Gold Price Forecast: XAU / USD falls back below USD 1780 on cautious market sentiment