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Gold prices gained on Tuesday, with worries over more persistent inflation keeping bullion’s appeal as a hedge against higher prices intact, despite a stronger U.S. dollar and elevated bond yields.

·         Spot gold rose 0.2% to $1,865.81 per ounce by 0652 GMT.

·         U.S. gold futures were up 0.1% to $1,868.40.

·         Gold prices have rallied 1.7% since last Wednesday’s surge in U.S. consumer prices last month, even as the dollar hit a 16-month high and 10-year Treasury yields moved higher.

·         “Inflation has gotten so high that markets reason that the Fed will be more hawkish but still not hawkish enough, boosting the appeal of an inflation hedge like gold despite the higher dollar,” DailyFX currency strategist Ilya Spivak said. But the metal’s range-bound moves after Wednesday’s break-out could suggest a “knee jerk” reaction to elevated inflation that does not have lasting follow through, Spivak said.

·         Investors now eye U.S. retail sales data due at 1330 GMT which follows last week’s weak consumer sentiment reading.

·         “The Fed’s announcement for start of asset purchases has been dampened by signals of delay in rate hikes, favouring gold investment,” ANZ analysts said in a note.

“Physical demand is also encouraging, with China imports averaging 25 tonnes against less than 10 tonnes last year”, ANZ said.

·         Gold Price Forecast: XAU/USD bulls pause near descending trend-line hurdle

Technical outlook

From a technical perspective, the recent strong move-up witnessed over the past two weeks or so stalled just ahead of a resistance marked by a downward sloping trend-line. The mentioned barrier extends from September 2020 swing highs and should now act as a key pivotal point for short-term traders. Given that the RSI on the daily chart has moved on the verge of breaking into the overbought territory, it will be prudent to wait for a convincing breakthrough of the trend-line before placing fresh bullish bets. The XAU/USD might then accelerate the momentum and aim to reclaim the $1,900 round figure before eventually darting to June swing highs, around the $1,916-17 region.

On the flip side, any meaningful pullback below the $1,850 level would now be seen as a buying opportunity. This, in turn, should help limit the downside near the $1,834-32 strong horizontal resistance breakpoint. Failure to defend the mentioned support levels might trigger aggressive long-unwinding trade and turn gold prices vulnerable to slide back towards the $1,800 mark. The $1,818-17 region and the $1,808-06 zone could act as intermediate support levels on the way down.

Later during the early North American session, traders will take cues from the release of the US monthly Retail Sales figures. The data, along with the US bond yields, will influence the USD price dynamics. Apart from this, the broader market risk sentiment will contribute to producing some trading opportunities around gold.

·         Gold Price Forecast: XAU/USD to simmer a break above the $1,900 level

Gold continues to trade above $1,860. The yellow metal seems to be attracting investors as a hedge against inflation but FXStreet’s Haresh Menghani warrants caution before placing aggressive bets on XAU/USD.

Inflation fears helped to limit losses

“The markets are pricing in the possibility for an eventual Fed rate hike move by July 2022. Moreover, the Fed funds futures indicate a high likelihood of another raise by November amid rising inflationary pressure.”

“The recent strong move-up stalled just ahead of a resistance marked by a downward sloping trend-line which extends from September 2020 swing highs and should now act as a key pivotal point for short-term traders. It will be prudent to wait for a convincing breakthrough of the trend-line before placing fresh bullish bets. XAU/USD might then accelerate the momentum and aim to reclaim the $1,900 level before eventually darting to June swing highs, around the $1,916-17 region.”

“Any meaningful pullback below the $1,850 level would now be seen as a buying opportunity. This, in turn, should help limit the downside near the $1,834-32 strong horizontal resistance breakpoint. Failure to defend the mentioned support levels might trigger aggressive long-unwinding trade and turn gold prices vulnerable to slide back towards the $1,800 mark.”

·             Gold Price Forecast: XAU/USD to soar back to the $2,075 record high on a break above $1,917 – Credit Suisse

·         Spot silver rose 0.1% to $25.06 per ounce.

·         Platinum fell 0.2% to $1,085.28.

·         Palladium dropped 0.9% to $2,133.89.

·         Dollar eases, yuan at 5-month high as Biden-Xi talks sound friendly

·         Bitcoin drops nearly 7% toward $60,000 as major cryptocurrencies plunge

·         Copper rises as investors cheer Xi-Biden talks

Copper prices rose on Tuesday, as the dollar weakened and risk sentiment improved on positive developments from a meeting between U.S. President Joe Biden and Chinese leader Xi Jinping.

Three-month copper on the London Metal Exchange rose as much as 0.7% to $9,742 a tonne before easing to trade down 0.6% at $9,616 a tonne by 0723 GMT.

The most-traded December copper contract on the Shanghai Futures Exchange closed down 0.8% to 70,360 yuan ($11,031.50) a tonne, having risen as much as 0.4% earlier in the session.

·         Biden-Xi virtual meeting ends with both sides calling for more cooperation amid tensions

U.S. President Joe Biden and Chinese President Xi Jinping met virtually Tuesday in the closest communication between the two countries’ leaders since Biden took office in January.

Both sides noted points of tension, and issued public statements after the meeting that emphasized ways to avoid conflict.

Biden said there was a “need for common-sense guardrails to ensure that competition does not veer into conflict and to keep lines of communication open,” according to White House readout after the meeting.

Xi said during the meeting that for China and the U.S. to get along “in a new era,” three principles of mutual respect, peaceful coexistence and win-win cooperation should be followed, according to China’s official English-language readout. Beijing typically uses language like “mutual respect” in calling for more favorable terms from the U.S.

Xi also compared the two countries to two large ships, which need to move forward together without colliding, according to a Chinese release.

·         Biden promises candor, Xi greets 'old friend' in U.S.-China talks

U.S. President Joe Biden and Chinese leader Xi Jinping stressed their responsibility to the world to avoid conflict as the heads of the two top global economies gathered for hours of talks on Monday.

"It seems to me our responsibility as leaders of China and the United States is to ensure that our competition between our countries does not veer into conflict, whether intended or unintended," Biden said.

·         Fed should hike interest rates immediately to cut stagflation risks, economist Stephen Roach suggests

Former Federal Reserve economist Stephen Roach sees only one way to contain inflation: immediate rate hikes.

If the Fed doesn’t act, he warns rising prices could send shockwaves through the economy.

·         BOJ decides to review scheme to aid regional banks

·         Australia's central bank again dismisses calls for 2022 rate hike

Australia’s top central banker has again pushed back against market wagers for a rise in interest rates next year, arguing that home-grown inflation was likely to lag well behind the spikes seen in some other developed nations.