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Gold extended its recovery on Monday buoyed by a pullback in U.S. Treasury yields and some safe-haven buying spurred by COVID-19 related concerns, with investors looking for more direction from the Federal Reserve on monetary policy.

· Spot gold rose 0.5% to $1,787.76 per ounce by 1440 GMT, erasing declines from earlier in the session.

· U.S. gold futures gained 0.6% to $1,788.10.

· Prices jumped more than 1% on Friday after data showed U.S. consumer sentiment plummeted in August, helping the metal recover from steep declines in the earlier part of last week after bets for tapering got a fillip from recent strong labour data.

· While COVID-19-related safe-haven buying has been seen in Europe, the U.S. market has not seen the same level of interest, said TD Securities commodity strategist Daniel Ghali, adding a rising trend of higher gold purchases from central banks are providing underlying support to bullion.

“We’re seeing an aftermath of a significant positioning squeeze in gold” with the large amount of short positions accumulated as Fed taper talks grew louder now being covered, Ghali added.

· Investors now await direction from Fed Chairman Jerome Powell and the central bank’s minutes from its July policy meeting.

· U.S. Treasury yields were pinned near more than a week low, reducing the opportunity cost of holding the non-interest bearing bullion.

· Markets are also keeping a close watch on turmoil in Afghanistan.

· “Over the weekend, the political situation in Afghanistan deteriorated drastically ... this might potentially affect the financial markets and the gold price, which we will find out over the next few days,” said Carlo Alberto De Casa, market analyst at Kinesis.

· Gold is often used as a safe store of value during political and financial uncertainty.

· Gold Price Forecast: XAU/USD to face tough resistance at $1800 – OCBC

Gold closed the week about 1% higher. Strategists at OCBC Bank expect the yellow metal to attempt the $1800 level this week if the bullish momentum within the precious metal complex continues.

FOMC minutes key for XAU/USD direction

“Our model sees a fair value range for gold from $1735 to $1845, so at the current level, gold is somewhere near the middle of this range.”

“The FOMC minutes is likely to determine gold’s next near-term direction, where a hawkish report may send gold tumbling once more.”

“From now till the report, we expect the upward momentum in gold to carry it towards the $1800 resistance.”

· SPDR GOLD HOLDINGS:

· TREASURIES-Yields lower on weak Chinese data, Afghan and COVID concerns

· N.Y. Fed's factory gauge softens on slower shipments, order growth

The New York Federal Reserve said on Monday its barometer of manufacturing business activity in New York State declined more than expected in August as shipments growth nearly stalled and new orders grew at a much softer pace than a month earlier.

The regional Fed’s “Empire State” index on current business conditions fell around 25 points to 18.3, lower than a reading of 29.0 forecast by analysts polled by Reuters. The index had hit a record high of 43 in July.

· Retail sales likely dipped in July as consumers held off on purchases amid Covid delta worries

· Fed’s Eric Rosengren backs tapering in the fall but no rate hikes until job market improves

Boston Federal Reserve President Eric Rosengren said Monday he would be prepared to start rolling back some of the central bank’s easy monetary policy this fall but isn’t ready yet to start thinking about raising interest rates.

Echoing recent comments from multiple Fed officials, Rosengren told CNBC that it’s probably appropriate to begin reducing, or tapering, bond purchases before the end of the year.

He voiced support for an announcement on the matter over the next month or two and said he thinks the pullback of the minimum $120 billion a month program will start shortly thereafter. Raising rates, though, will have to wait for the job market to improve.

· Fed appears likely to announce ‘taper’ during September meeting

CNBC’s Steve Liesman reports on the likelihood that the Fed will announce tapering measures in response to the U.S. economic recovery.

· Jim Cramer says Fed policy tightening should be low on list of investor worries

CNBC’s Jim Cramer said Monday that investors should avoid the trap of making every buy and sell decision based on predictions of Federal Reserve policy moves.

“When it comes to things you should worry about right now, the Fed tapering its bond purchases, I mean honestly, it should be pretty low on your list,” the “Mad Money” host said, describing “endless focus on the Fed” as a “textbook case of lazy thinking.”

While potential Fed tightening is not irrelevant, Cramer said, other forces are impacting near-term market rotations. For example, he said the strength of the American consumer is a very important consideration, particularly in a week when heavyweight retailers such as Walmart, Home Depot and Target are scheduled to report quarterly results.

The deteriorating situation in Afghanistan and its broader foreign policy implications in other parts of the world, especially the U.S.-China relationship, also matter, Cramer said. Further, he said Wall Street is assessing the highly contagious coronavirus delta variant and making the judgment that any restrictions on indoor activities will likely be short-lived.

· IAEA reports Iranian progress on uranium metal despite Western objections

Iran has made progress in its work on enriched uranium metal, the U.N. nuclear watchdog said in a report to member states on Monday seen by Reuters, despite Western warnings that such work threatens talks on reviving the Iran nuclear deal.

"On 14 August 2021, the Agency verified ... that Iran had used 257 g of uranium enriched up to 20% U-235 in the form of UF4 (uranium tetrafluoride) to produce 200 g of uranium metal enriched up to 20% U-235," the International Atomic Energy Agency said, adding that this was step three in a four-step plan by Iran. The fourth includes producing a reactor fuel plate.

· Biden defends Afghanistan decision, blames Afghan army's unwillingness to fight

Biden says Afghanistan war was a lost cause, vows to continue aid and diplomacy

· COVID-19 UPDATES:

· ‘We are on fire’: Five U.S. states set new records for Covid cases as hospitalizations rise

· As Delta spreads, some travelers double up on COVID-19 vaccine in U.S.

· Pfizer submits data to FDA for authorization of Covid vaccine booster shot for general population