Gold (XAU/USD) recovery fades during the fifth day of trading after refreshing the multi-day low on June 29. That said, gold bulls take a breather around key technical levels surrounding $1,791, following an upside break of a short-term hurdle the previous day, amid an early Asian session on Tuesday.
Bulls await more clues…
With the US markets’ extended weekend restricting clues to stretch Friday’s optimism, post US jobs report, gold traders await initial full market reactions to the latest catalysts to keep the gold buyers hopeful.
On a different page, OPEC+'s indecision over the crude output cut leads to sustained restrictions ahead of the next meeting, which in turn lends indirect support to the gold prices.
Amid these plays, S&P 500 Futures stay mildly bid around the record top while the US 10-year Treasury yields lick their wounds around 1.43% by the press time.
Moving on, US ISM Services PMI for June, expected 63.5 versus 64.0 prior, will be crucial as gold buyers seek further deterioration of the factors supporting the Fed’s rate hike moves ahead of Wednesday’s FOMC minutes.
Technical analysis
Gold (XAU/USD) prices battle 100-SMA after crossing a 12-day-old resistance line the previous day.
The yellow metal’s reluctance to pierce the key SMA could be traced to the peaking Momentum line. However, bulls may follow MACD signals to remain hopeful unless the quote drops back below the previous resistance line near $1,787.
Following that, $1,773 and the $1,773 levels may entertain short-term sellers ahead of directing them to June’s low around $1,750.
Meanwhile, an upside clearance of the $1,794 immediate SMA hurdle will need validation from the $1,800 threshold before directing the bulls toward the 200-SMA level near $1,844.
It’s worth noting that a horizontal line comprising multiple levels marked during June 10-15 around $1,870 could probe gold buyers past $1,844.
Overall, gold bulls flex muscles but need strong support for conviction.
· Gold price boosted by recovery in central bank buying
Gold has recaptured some of its shine lately as central banks from Serbia to Thailand have been adding to their holdings.
“Long term, gold is the most significant guardian and guarantor of protection against inflationary and other forms of financial risks,” said the National Bank of Serbia.
Serbian President Aleksandar Vucic recently announced the central bank intends to boost holdings of the precious metal to 50 tonnes from 36.3 tonnes.
Ghana also recently announced plans for purchases, as the specter of accelerating inflation looms and a recovery in global trade provides the firepower to make purchases.
A rebound in central bank buying — which had dropped to the lowest in a decade — has bolstered the prospects for gold prices as some other sources of demand falter.
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The recovery in global trade is bolstering the current accounts of emerging market nations, giving their central banks the option of buying more gold. Higher crude prices are also boosting bullion purchases by oil exporters, including Kazakhstan, according to James Steel, chief precious metals analyst at HSBC Holdings Plc.
That’s likely to continue, Steel said in a note to Bloomberg.
“If a central bank is looking at diversifying, gold is a marvelous way of moving out of the dollar without selecting another currency,” he added.
In a bullish scenario, as the global economy rebounds, central bank buying could reach about 1,000 tonnes, Aakash Doshi and other Citigroup Inc. analysts wrote in a report.
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The bank’s forecast is for purchases to climb to 500 tonnes in 2021 and 540 tonnes next year. That is below the twin peaks above 600 tonnes in 2018 and 2019, but a significant advance on the 326.3 tonnes purchased last year, according to World Gold Council data.
· Hedge funds still bearish on gold but sentiment is starting to shift
Bearish bets continue to dominate the gold market even as some hedge funds retest some of the investment waters as the market looks for some support at a two-month low, according to the latest trade data from the Commodity Futures Trading Commission.
The CFTC disaggregated Commitments of Traders report, for the week ending June 29, showed money managers increase their speculative gross long positions in Comex gold futures by 5,400 contracts to 115,438. At the same time, short positions rose by 6,554 contracts to 54,056.
The gold market has seen its net length drop for four consecutive weeks and now stands at 61,382 contracts, down 3% from the previous week and is at its lowest level since early May.
· During the survey period, gold prices tested critical support around $1,750 an ounce.
Although bearish bets continue to dominate gold's speculative market, some analysts say that sentiment is starting to shift, especially as goldgold prices look to push back above their 100-day moving average and test important resistance at $1,800 an ounce.
Ole Hansen, head of commodity strategy at Saxo Bank, said that the gold's growing bearish tilt creates a short-covering risk in the marketplace. He added that he is watching $1,814 an ounce and a move past that level could trigger a potential short squeeze.
Analysts at TD Securities also said they see the potential for renewed bullish momentum in the gold market.
"With money managers growing longs, albeit modestly, not all positioning was betting on a decline amid technical and macro factors. Indeed, those who bet long ended up being correct due to a continued slide in Treasury yields and concerns that the Delta variant may slow growth. At the end of the week, gold jumped to $1,788/oz as the market judged the June payrolls data to be conducive to easy monetary policy for a prolonged time, and as yields plunged," the analysts said.
TD Securities added that they are watching gold's 100-day moving average.
· Sentiment in the silver market also appears to be turning bullish as hedge funds covered their bearish bets as the metal managed to hold support above $25.50 an ounce.
The disaggregated report showed money-managed speculative gross long positions in Comex silver futures rose by 559 contracts to 72,624. At the same time, short positions dropped by 2,763 contracts to 24,076.
Silver's net length increased to 32,854 contracts, up 11% from the previous week, which represented a 2-month low. During the survey period, silver prices pushed back above $26 an ounce.
· CURRENCIES
The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 92.241 — off levels above 92.4 seen late last week.
The Japanese yen traded at 110.86 per dollar after touching levels around 110.8 against the greenback yesterday. The Australian dollar changed hands at $0.7541, above levels below $0.752 seen yesterday.
· JPMorgan says U.S. dollar strength will be ‘fairly short-lived’
Tai Hui of JPMorgan Asset Management says the weakening of the U.S. dollar will be “more positive” for emerging markets in Asia as it takes the pressure off central banks to raise interest rates.
· World shares hold near record highs
World stocks stayed close to record highs on Monday as investors weighed surging European business activity and a welcome U.S. jobs report against worries about the highly transmissible Delta variant of COVID-19.
· Euro zone business activity soared in June as lockdowns lifted
Euro zone businesses expanded activity at the fastest rate in 15 years in June as the easing of more coronavirus restrictions brought life back to the bloc’s dominant service industry, a survey showed on Monday.
But that surge in growth has come at a cost as inflationary pressures mounted due to labour shortages and disruptions to supply chains caused by the pandemic.
IHS Markit’s final composite Purchasing Managers’ Index (PMI), seen as a good gauge of economic health, jumped to 59.5 last month from May’s 57.1, its highest level since June 2006.
That was ahead of the 59.2 “flash” estimate and well above the 50 mark separating growth from contraction.
· OPEC+ crisis talks abandoned as Saudi Arabia and the UAE remain at loggerheads over oil output
· Oil prices jump to multiyear highs after OPEC+ talks yield no production deal
Oil jumped to its highest level in nearly three years on Monday after talks between OPEC and its oil-producing allies were postponed indefinitely, with the group failing to reach an agreement on production policy for August and beyond.
· Biden administration pushes for 'compromise solution' in OPEC+ talks
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· Boris Johnson says England on track to lift Covid restrictions and rules on mask-wearing
“If we can’t reopen our society in the next few weeks when we will be helped by the arrival of summer and the school holidays, we must ask ourselves ‘when will we be able to reopen?’” Johnson told a press briefing at Downing Street.
“Freedom Day” — or “Step 4″ in the government’s long-term plan to ease restrictions — will take place on July 19 if the government’s “four tests” for easing Covid restrictions are met.
· Australia’s Covid recovery plans remain uncertain as it tries to contain the delta variant
· Israel sees drop in Pfizer vaccine protection against infections
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