Gold to Trade Bullishly above 1,784 – Covid & Afghan Taliban Boost Safe-Haven Appeal

Gold (XAU/USD) picked up some bids to place an intraday high of around $1,792, which was up 0.13% on the day. Investors are turning towards the safe-haven yellow metal, as increasing concerns over the latest COVID-19 outbreaks have increased the safe-haven demand in the market. Apart from the virus concerns, the fact that Kabul is now under the control of the Taliban, coupled with mixed updates on the Fed’s next moves, put some additional burden on the market trading mood.

This was seen as one of the leading factors that kept the gold prices higher. Besides this, the latest bearish bias surrounding the US dollar was seen as another critical factor that provided additional support to the dollar-denominated commodity (gold).

The market trading sentiment failed to end its sluggish performance of the previous day, remaining well offered on the day, as coronavirus woes escalated. As per the latest COVID  figures, New Zealand has recorded four new cases linked to the first one that was identified in Auckland one day previously.

Meanwhile, New South Wales, Australia, has recorded an all-time high in coronavirus cases, propelling the national count to the highest level since August 2020. In addition to this, the number of weekly infections in the US is set to touch 200,000, and the UK has recorded the highest virus-led death toll since March. However, the worsening pandemic-related conditions in Australia and New Zealand, and the cautious sentiment ahead of the release of the minutes of the Federal Open Market Committee (FOMC) meting are keeping the gold buyers hopeful.

In addition to this, the Taliban control of Kabul has put an additional burden on the market trading mood, with the bearish stock futures highlighting the risk-off sentiment, benefitting the dollar-denominated commodity, gold.

The reason for the risk-off market trading sentiment could also be attributed to the disappointing US Retail Sales for July, which were released recently. They came in at -1.1% MoM, versus the forecast of -0.3%, and the previous +0.7%. This amplified economic fears due to the Delta variant of the coronavirus, even though the Atlanta Fed GDPNow indicator for Q3 rose to 6.2%, versus 6.0% for Q2.

In terms of the Australian economic data, Australia’s Westpac Leading Index for July came in during the early Asian trading session, showing a drop from -0.07% to -0.11%. After that, the Q2 2021 Wage Price Index came in. It also dropped, coming in at 0.4%, which was below the 0.6% QoQ market consensus and prior readouts.

Despite the risk-off market sentiment, the broad-based US dollar failed to extend its positive early-day performance, turning sour during the second half of the Asian session. This could be tied to the release of the disappointing US Retail Sales data, which raised doubts over economic recovery in the US, and contributed to the losses in the greenback.

Meanwhile, the cautious sentiment ahead of the release of the minutes of the Federal Open Market Committee (FOMC) meeting also significantly undermined the dollar. The declines in the American currency were seen as one of the key factors that helped the gold prices to stay bid, 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 minutes of the FOMC monetary policy meeting. Apart from this, the headlines about the Sino-US tussle and the Taliban-Afghanistan matter will also be essential to watch.

The sentiment surrounding the precious metal, gold, is slightly optimistic on Wednesday, with gold trading just above the support level of 1,787. An immediate barrier remains at 1,795; a positive crossover beyond this level might initially expose prices to levels of 1,802 and 1,809.

If the buying trend continues, gold prices may be exposed to the 1,832 mark. Gold is finding immediate support at 1,779 and 1,764. The stochastic indicator is still pointing in the direction of a purchase. The 1,787 level, on the other hand, is very important today, due to the bullish bias. A negative breakthrough below this level will lead to sellers taking control.