- Gold witnessed a modest pullback from over one-week tops touched earlier this Monday.
- COVID-19 jitters, reduced bets for an early Fed taper should help limit any meaningful slide.
- The focus now shifts to US Retail Sales figures, Powell’s speech and FOMC meeting minutes.
Gold struggled to preserve its modest intraday gains and witnessed a modest pullback from over one-week tops touched earlier this Monday. The downside, however, remains cushioned and the XAU/USD seems poised to capitalize on last week’s solid bounce from the $1,687 region, or the lowest level since March. Worries that the fast-spreading Delta variant of the coronavirus could derail the global economic recovery might continue to act as a tailwind for the safe-haven precious metal. This, along with a turnaround in sentiment surrounding the US dollar, should lend some support to the dollar-denominated commodity.
As investors looked past blockbuster US jobs report for July, signs of moderating inflationary pressure kept a lid on the recent USD rally. Adding to this, a sharp fall in the US consumer confidence forced investors to scale back their bets for an early tightening of the policy by the Fed. In fact, the preliminary University of Michigan Consumer Sentiment index slumped to the lowest level since December 2011 in August. This, in turn, triggered a fresh leg down in the US Treasury bond yields. This, in turn, could further underpin the non-yielding yellow metal ahead of this week’s key event/data risks.
Market participants now look forward to the US monthly Retail Sales figures to gauge the strength of the economic recovery. Apart from this, Fed Chair Jerome Powell’s scheduled speech on Tuesday and the latest FOMC monetary policy meeting on Wednesday will influence market expectations for the next policy move by the Fed. This, along with developments surrounding the coronavirus saga, will play a key role in determining the next leg of a directional move for gold. In the meantime, the broader market risk sentiment, the US bond yields and the USD price dynamics might provide some impetus amid absent relevant market-moving economic releases on Monday.
Short-term technical outlook
From a technical perspective, any subsequent positive move is likely to confront some resistance near the $1,790 horizontal zone. This is closely followed by the $1,800 round-figure mark and the $1,805-15 confluence region, comprising of 100-day and 200-day SMAs. A sustained move beyond will set the stage for additional gains towards the $1,832-34 heavy supply zone. Some follow-through buying will be seen as a fresh trigger for bullish traders and pave the way for a further near-term appreciating move.
On the flip side, the $1,760 region, marking the 50% Fibonacci level of the $1,832-$1,688 downfall now seems to protect the immediate downside. Any further decline might still be seen as a buying opportunity and remain limited near the $1,745-43 area, or the 38.2% Fibo. level. This should now act as a key pivotal point, which if broken decisively might shift the near-term bias back in favour of bearish traders. The next relevant support is pegged near the $1,725 zone ahead of the 23.6% Fibo. level, around the $1,720 level.