- A combination of diverging forces failed to provide any impetus to gold on Tuesday.
- Worries about the Delta variant acted as a tailwind for the safe-haven commodity.
- The risk-on impulse, an uptick in the US bond yields capped any meaningful gains.
- Gold Price Forecast: Covid vaccine optimism threatens XAU/USD’s upward trajectory, what next?
Update: After rising to its strongest level since August 5 at $1,809.59 in the early trading hours of the American session on Tuesday, good lost its bullish momentum and not looks to close the day flat around $1,805. The upbeat market mood seems to be keeping gold's gains limited while making it difficult for the USD to outperform its rivals. Earlier in the day, the data from the US showed that New Home Sales rose by 1% in July, compared to analysts' estimate for a decrease of 2.7%. On a negative note, the Richmond Fed Manufacturing Index declined to 9 in August from 27 in July but this print had little to no impact on market sentiment.
Gold gained some positive traction during the early North American session and climbed to near three-week tops, around the $1,809 area in the last hour, albeit lacked follow-through. Worries that the continuous surge in the Delta variant infections could threaten the global economic recovery. The concerns drove some flows towards traditional safe-haven assets, including gold.
Meanwhile, the worsening COVID-19 situation in the US might have convinced investors that the Fed would wait for a longer period before rolling back its pandemic-era stimulus. This, in turn, kept the US dollar bulls on the defensive and further extended some support to the XAU/USD. A weaker USD tends to benefit dollar-denominated commodities, including gold.
That said, a positive opening in the US equity markets and an uptick in the US Treasury bond yields capped the upside for the non-yielding gold. The global risk sentiment got a lift after China said that it had stopped the community spread of COVID-19. Adding to this, the US Food and Drug Administration (FDA) granted full approval to the Pfizer/BioNTech COVID-19 vaccine and further boosted investors' appetite for perceived riskier assets.
Moreover, investors also seemed reluctant, rather preferred to wait on the sidelines ahead of the Fed Chair Jerome Powell's speech at the Jackson Hole Symposium. This was seen as another factor that held investors from placing aggressive bets around gold. Powell's comments might influence the market expectations about the next policy move by the Fed and help determine the next leg of a directional move for the precious metal.
Technical analysis
From a technical perspective, gold, so far, has struggled to break through an important confluence hurdle near the $1,811-12 region, comprising 100-day and 200-day SMAs. This should now act as a key pivotal point for short-term traders. Given that technical indicators on the daily chart have been gaining positive traction, some follow-through buying has the potential to lift the commodity back towards the $1,832-34 supply zone. The mentioned region marks the double-top resistance, which if cleared decisively will be seen as a fresh trigger for bullish traders.
On the flip side, fall below the $1,800 mark might attract some buying near the $1,787-85 region. This is closely followed by support near the $1,775 horizontal level. Sustained weakness below will shift the bias in favour of bearish traders and accelerate the slide towards the $1,752-50 support. The next relevant support is pegged near the $1,729-28 region, below which gold might turn vulnerable to retest sub-$1,700 level, or monthly lows touched on August 9.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.