Gold Survives Above 1,795 – All Eyes on Fed Policy Meeting
Arslan Butt • 3 min read
During the Asian trading session today, the precious metal managed to stop its two-day downward rally, drawing some fresh bids well above the $1,800 level, as China’s latest crackdown on technology and tuition stocks keeps weighing on the market trading sentiment, which tends to underpin the prices of safe-havens, like GOLD. Moreover, the mounting COVID-19 fears and mixed data from the US also played a major role in weakening the market trading sentiment, leading to further gains in gold prices.
In addition to this, the buying bias surrounding the gold prices could also be attributed to the escalating Sino-US tussle, which is still not showing any signs of coming to an end. The deadlock over US President Joe Biden’s infrastructure spending plan is also adding to the burden on the market trading sentiment. On a different page, the strength of the broad-based US dollar, backed by multiple factors, was seen as one of the leading issues that is capping any further gains in the prices of the commodity, as the price of gold is inversely related to the price of the US dollar. At the time of writing, gold was trading at 1,804.78 and consolidating in a range between 1,798.13 and 1,807.46.
Virus Updates & Mixed US Data
The market sentiment failed to halt its poor early-day performance and remained pessimistic during the second half of the Asian session. The International Monetary Fund (IMF) has conveyed economic concerns over the resurgence of the coronavirus, which in turn has challenged the market trading sentiment. Meanwhile, China’s latest crackdown on technology stocks and private education, coupled with the deadlock over President Joe Biden’s infrastructure spending plan, exerted some additional downside pressure on the market trading mood.
On the coronavirus front, the deadly Delta variant of the coronavirus has picked up further pace across the globe, threatening global economic recovery and keeping the market trading sentiment under pressure. In Australia, New South Wales has recorded the highest daily COVID count levels since March, amounting to 177. This pushes the national tally up to 205, which is the highest number in 11 months. As a result, NSW Premier Gladys Berejiklian has formally declared an extension of the 4-week lockdown in Queensland, and the unlocking in Victoria is also subject to multiple local restrictions.
On the other hand, the US Durable Goods Orders and housing figures came in softer than expected for May and June; the notable upward revision to the priors renewed bets that the Fed hawks have scope. Meanwhile, the US Conference Board (CB) consumer confidence index for July was 129.1 – its highest level in 17 months. The data indicated that household spending plans are growing, even amid inflationary pressures, indicating that the US economy has maintained its strong growth, as the 3rd-quarter gets underway.
Weaker Dollar Underpins Gold
The broad-based US dollar managed to extend its early-day gains, remaining well bid ahead of the European session, as the spread of the Delta variant of COVID-19 across the globe has raised doubts over the sustainability of the global recovery, which tends to underpin the safe-haven US dollar. Furthermore, the greenback got some additional lift, due to the cautious sentiment ahead of the US Federal Reserve’s latest policy decision, which gave the safe-haven US currency a boost. Thus, the gains in the US dollar were seen as one of the key factors that kept a lid on any additional gains in the gold prices, due to the inverse relationship between the price of gold and the price of the US dollar.
Looking forward, the market traders will keep their eyes on the US Federal Reserve’s latest policy decision. The Fed will hand down its decision later in the day, and Chairman Jerome Powell will speak at a press conference immediately thereafter. The policy decision and Powell’s remarks will both be watched for clues on the central bank’s timeline for asset tapering and interest rate hikes. In the end, the price movement of the US dollar will continue to play a key role in the direction of the commodity.
Gold – XAU/USD – Daily Support and Resistance
Pivot Point: 1,799.33
R3 1,822.72The precious metal, GOLD, is trading sideways above the 1,795 level, and it could bounce off until the next resistance level of 1,832. On the daily timeframe, the 50 EMA is extending resistance at 1,810 and 1,832. A bullish crossover at 1,832 could lead the gold price towards the 1,844 level.