Gold prices held steady below a one-week high on Monday as lingering concerns over higher inflation and a slowdown in economic growth countered pressure from a firmer dollar.
Harshal Barot, a senior research consultant for South Asia at Metals Focus, said gold’s downside remained protected because of inflationary pressures, especially given a surge in energy costs.
“What we’re seeing is that inflation isn’t going to be as short-lived as initially expected and this might start negatively impacting growth,” Barot said, adding it could also delay a tapering by the U.S. Federal Reserve, though that would ultimately hinge on upcoming economic data.
“With gold near the lows of its recent range, it is attractive as a short-term hedge against potential political disruptions in Washington and elsewhere,” said Stephen Innes, managing partner at SPI Asset Management.
Gold (XAU/USD) pares intraday gains near a one-week high during early Monday, up 0.16% on a day near $1,763 by the press time.
Fresh fears concerning the US-China trade relations and the suspension of the Evergrande shares in Hong Kong probe gold buyers of late. On the same line were concerns over the US debt ceiling talks as the policymakers remain feared after Democrats had to step back from the voting on the bill on Thursday.
Even so, off in China and US President Joe Biden’s readiness to “work like hell” for the stimulus and debt ceiling solution keep buyers hopeful.
That said, the US 10-year Treasury yields remain pressured but the S&P 500 Futures print mild losses amid challenges over Evergrande.
Technical analysis
Gold breaks a monthly resistance line during the three-day upside but the 100-SMA level surrounding $1,765 challenges the metal buyers of late.
Given the bullish MACD signals and upbeat RSI conditions, not overbought, gold prices may remain firmer towards a seven-week-old horizontal resistance near $1,780.
Should the quote manages to remain stronger past $1,780, the $1,806 and the $1,821 levels may probe the upside momentum targeting the last month’s high near $1,834, part of the “double top” formation, will be crucial to watch.
Meanwhile, pullback moves may drop back below the previous resistance line near $1,760, targeting 61.8% Fibonacci retracement of August-September upside close to $1,743.
Gold (XAU/USD) remains entrenched in its range as the yellow metal extends its consolidation beneath the July and August highs at $1832/34 – but with the broader risk seen to the downside, according to strategists at Credit Suisse.
Rising US Real Yields and a strengthening USD to continue to weigh on XAU/USD
“Although downward pressure is seen increasing, only below $1691/77 would mark a major top for an important change of trend lower, with support then seen at $1620/15 initially, before $1565/60.”
“Only a break above $1834 would be seen to complete an in-range base to clear the way for a deeper recovery to $1860, then $1917.”
“Gold arguably already moved ahead of the move higher in Real Yields, however we still see scope for 10yr US Real Yields to rise further to retest their highs seen earlier this year, which would suggest XAU/USD is likely to stay under pressure and with the base in the USD also likely to prove a headwind.”
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Reference: Reuters, CNBC, FXStreet
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