Gold Price Forecast: XAU/USD treads water around $1780 amid a quiet start to the NFP week

Update: Gold price is struggling to recover ground above $1780, having found support at $1770 once again. Despite the uptick in the US dollar across the board, the risk-off market mood, in response to rising Delta covid strain concerns, underpins gold’s safe-haven appeal. Further, a minor retreat in the US Treasury yields across the curve amid dovish Fed expectations also offer some support to the non-yielding gold price. Looking ahead, gold price will remain at the mercy of the US dollar price action and risk trends, in absence of any first-tier US economic events, which makes it a quiet start to the NFP week.

Read: Gold Weekly Forecast: Sellers look to retain control following uninspiring rebound

At the time of writing, gold is trading on the bid in the open for the week, higher by 0.38% from the get-go at $1,781.64. The price of gold has rallied from a low of $1,773.79 and has reached a high of $1,790.44. 

Gold prices finished on Friday at $1,780.30 and 0.29% higher after moving up from a low of $1,773.80 and reaching a high of $1,790.37.

Meanwhile, the US dollar is flat in the open on Monday, stalling in its recovery from the pressure early on Friday following the miss in producer price inflation.

The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, increased 0.5%, below economists’ expectations of an 0.6% increase. There is no runaway inflation in this report, which counters the Fed’s faster action, weighing on the greenback.

At the time of writing, DXY is trading at 91.81, a touch below the 91.838 Friday close. However, in the 12 months through May, the core PCE price index shot up 3.4%, the largest gain since April 1992.

Meanwhile, volatility levels are sinking fast again following a brief hiatus around the FOMC meeting although there could be another flurry for the week ahead due to critical US data.

Consumer confidence, ADP, ISM and Friday’s June Nonfarm Payrolls figure will be under the spotlight. A significant number close to the one million mark will be needed to avert a low volatility summer.

Analysts at TD Securities explained that the start of the process of preparing the market for QE tapering has introduced an additional hawkish element to Fed policy expectations.

''The resulting sharp drop, which saw prices fall by some $100 to the $1,770s, and fear of a more pronounced rout also prompted money managers to build short positions. However, with the market reflecting on continued economic risks and yields remaining quite low, it is unlikely there will continue to be aggressive reductions in length.''

''Indeed, once the dust settles, gold should migrate well above $1,800/oz in the next months with investors likely increasing exposure in the yellow metal, the analysts added. 

Gold technical analysis

However, gold has failed to trade stronger into the $1800s and there is a lack of an immediate impetus to buy the yellow metal which puts the focus on the downside from a technical point of view.

Chart of the Week: Gold meets a critical landmark

A close below 1,772 and 4-hour support will be important and will put the 1,750’s on the map for the bears. 

Previous update

Update: Gold (XAU/USD) prices hold lower ground near $1,780, down 0.09% intraday, despite the latest bounce off intraday low during Monday’s Asian session. While the US dollar pullback could be linked to the commodity’s latest U-turn, downbeat US Treasury yields and mildly bid stock futures are extra catalysts to help gold buyers lick their wounds.

However, fears of the Fed action, backed by last week’s US Core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred gauge, probe gold’s short-term upside amid a lack of major data/events. It’s worth mentioning that the Fedspeak becomes the key driver to watch ahead of Friday’s US Nonfarm Payrolls as the policymakers keep rejecting reflation fears and seek confirmation from the key job report.