Choppy Session Continues for Gold – Can Monday Drive a Breakout?
Gold is trading sideways at 1,783 level, facing immediate resistance at 1,793 level along with a support area of 1,764 level. A bearish...
During Monday’s Asian trading hours, the gold price extended its bearish early-day movements, edging lower to around the $1,780 level. The modest selling bias in the GOLD price was supported by the positive developments over US President Joe Biden’s infrastructure spending plan, which positively impacted the market mood and contributed to the losses in the safe-haven yellow metal. Meanwhile, the previously released upbeat US data and hopes of early unlocking of the virus-led restrictions on activities in the UK, further boosted the market trading mood.
This turned out to be one of the key factors that weighed on the safe-haven yellow metal. On a different page, the bullish bias surrounding the broad-based US dollar, backed by the previously released upbeat US data, has also played a key role in undermining the gold prices, as the price of gold usually moves inversely to the US dollar. Conversely, the downbeat headlines concerning the coronavirus (COVID-19) and US inflation fears are probing the upbeat market mood, which may help limit deeper losses in the gold price. Furthermore, these losses were also capped by the mild recovery in the US Treasury yields across the curve, amid dovish Fed expectations. The yellow metal is trading at 1,779.80, and consolidating in the range between 1,770.74 and 1,782.91.
Despite the ever-increasing fears of the coronavirus (COVID-19), the market trading sentiment succeeded in shaking off its bearish early-day performance, drawing some mild bids near an all-time high. However, the positive mood regarding Asia-Pacific stocks and upticks in the S&P 500 Futures tend to highlight the risk-on mood, which was being supported by the positive development over US President Joe Biden’s infrastructure spending plan.
Furthermore, the upbeat market moves could also be attributed to the previously released upbeat data from the USA, which raised hopes over global economic recovery. On the data front, the US Core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred gauge of inflation, hit the highest level in nearly three decades, with 3.4% YoY figures in May. Apart from this, the final GDP report released during the previous week, confirmed that the US economy grew by a 6.4% annualized, during the 1st quarter of 2021, matching the preliminary estimates. Durable Goods Orders and Initial Weekly Jobless Claims dropped, resulting in the positive development that put a bid under the US stocks, which was seen as one of the key factors that weakened the safe-haven-metal prices.
Despite the risk-on market mood, the broad-based US dollar succeeded in stopping its negative performance of the previous week, drawing some bids near 91.88, up 0.07%, after marking the first weekly downside in five days by the end of Friday. The US dollar is getting support from the US Core Personal Consumption Expenditures (PCE) Price Index, which climbed to its highest level in nearly three decades, with 3.4% YoY figures in May. Meanwhile, the mounting fears concerning the coronavirus (COVID-19) also favored the safe-haven USD bulls. So, the stronger greenback was understood as one of the key factors that kept the bullion prices under pressure, due to the inverse reltionship between the price of gold and the price of the US dollar.
On a different page, the downbeat headlines concerning the coronavirus (COVID-19) and the US inflation fears are having an effect on the upbeat market mood, which may help to limit the losses in the gold price. As per the latest report, the Australian government recently announced extra measures to control the resurgence of the virus after 30 fresh infections were recorded in Australia’s New South Wales (NSW). An expanded lockdown now affects 5 million people in Greater Sydney, the Blue Mountains, Central Coast and Wollongong. Investors are worried about a spike in coronavirus infections in Asia. In the meantime, Indonesia is facing record high cases while Malaysia is considering an extension of the lockdown. Thailand has also announced new restrictions in Bangkok and other provinces.
Moving forward, a lack of major data/events will keep market traders dull throughout the day. Despite this, they will keep their eyes firmly on the US Federal Reserve speech, which is due to be published during the US session. Meanwhile, the UK’s reaction to the latest political and Brexit updates will also be closely observed. Apart from this, the news on US President Joe Biden’s infrastructure spending plan will not lose its significance.
Gold – XAU/USD – Support and Resistance
S3 1,753.37
S2 1,767.97
S1 1,774.72
Pivot Point: 1,782.56
R1 1,789.32
R2 1,797.16
R3 1,811.76
GOLD is trading sideways at the 1,783 level, facing immediate resistance at 1,793, along with a support area of 1,764. A bearish breakout at 1,793 could lead the gold price towards 1,825 resistance, while the support level remains at 1,755 and 1,730. The 50 periods EMA suggests a continuation of a bearish bias in gold. However, gold has come closer to the 50 EMA resistance area at the 1,788 level, and a bullish crossover could extend the selling trend in gold until 1,814. Conversely, the support remains at 1,764. Good luck!
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