Gold Price Analysis: XAU/USD buyers attack $1,970 to avoid monthly losses

• Gold keeps Friday’s positive momentum to pierce $1,970.
• Traders cheer US dollar weakness, ignore mixed updates on virus and vaccine.
• American Congress struggles over COVID-19 budget, US-China tussle remains on the table.
• China PMIs, Japanese Retail Sales and Industrial Production decorate the calendar.

Gold prices kick-start the week’s trading with a run-up to $1,974.61, currently around $1,971/72. In doing so, the yellow metal extends Friday’s gains while cheering the US dollar weakness and mixed fundamental signals flashed off-late. Also helping the bulls could be a clear break of a descending trend line from August 07. It's worth mentioning that the yellow metal needs a daily close beyond $1,976 to defy the first monthly negative closing in previous five months.

US dollar weakness renews buying…

Although the Sino-American tussle and worries concerning the US stimulus keep restricting the yellow metal’s downside, it was the US dollar’s declines that recalled the bulls on Friday. The US dollar index (DXY) reversed Thursday’s Fed-backed gains while marking heaviest losses to revisit the 27-month low flashed during August 18. The reasons could be spotted from the downbeat prints of America’s Core PCE data indicating thin air for optimism concerning US inflation. The greenback earlier cheered Federal Reserve Chairman Jerome Powell’s push for flexible monetary policy even if the inflation goes a bit past-2.0% target for a while.

Additionally, news that the US policymakers are still jostling over the coronavirus (COVID-19) aid package joins the mixed signals relating to the pandemic to propel the bullion prices. Having earlier dropped the COVID-19 aid package talks, Republicans and Democrats allege each other for the deadlock. Recently, the White House Chief of Staff Mark Meadows blamed the impasse on a new coronavirus relief bill on House Speaker Nancy Pelosi, said the Politico news. Elsewhere, the US health official Dr. Fauci seems to take a U-turn from his earlier suggestion to not rush towards the cure while indicating an early vaccine. On the other hand, Oxford University Professor Richard Peto cites fears of worsening the crisis if rushing an untried vaccine. Amid all these catalysts, the virus numbers from the key economies, including the US and except for Europe, whereas America, Brazil and India, unfortunately, hold the first ranks.

Against this backdrop, the market’s risk-tone remains upbeat with Wall Street welcoming the bulls and S&P 500 Futures pick-up the bids near record high above 3,500. Further, the US 10-year Treasury yields seesaw around 0.72%.

Looking forward, traders will keep eyes on China’s official PMI data for fresh direction while Japan’s Industrial Production and Retail Sales may also entertain the traders. Although Tokyo’s Industrial Production may recover on the YoY basis, the first anticipated contraction in China’s manufacturing activity may keep the gold bulls happy.

Technical analysis

A clear break of 21-day SMA, currently around $1,970 becomes necessary for the bulls to cheer an upside clearance of the three-week-old falling trend line, at $1,933.70 now.