Gold prices began the European trading day falling, touching a fresh daily decline of $1,788 in the past hour. In turn, prospects for a near-term Fed taper declaration together with a little increase in US Treasury bond rates have been highlighted as a significant contributing element in the face of yellow metal’s inability to pay dividends. Though the global economic downturn and the emergence of the rapidly spreading Delta virus strain might offer some assistance to the conventional relatively secure XAU/USD, these risks must still be carefully considered.
Apart from that, a short-term follow-through on the multiple highs reached by the US dollar on the previous day could work as a tailwind for gold, which has dollar-denominated futures and assist limit losses. The USD bulls elected to take a wait-and-see approach, expecting some information on the Fed’s tapering timeline shortly. With much of the market attention focused on the latest August US consumer inflation numbers, which will be released in the early morning hours of the North American session.
The CPI statistics will have a substantial effect on the US dollar and hence the gold market, which will benefit from a rise in price going into the FOMC conference on Sept 20-21. In the short term, the XAU/USD is expected to continue to consolidate its price movements and to stay inside a price band that has persisted for almost one week.
Previously, Gold (XAU/USD) was down 0.05 percent intraday at $1,793 as slow Asian markets ahead of European traders’ arrival seemed bearish. The US’s eight-year rising inflation forecasts signify reflation fears to the market, which is exacerbated by worries over deflation.
The next Federal Reserve action on trimming is still uncertain, with the latest comment coming from Federal Reserve Bank President Patrick Harker who advocated for the earlier downsizing but avoided acknowledging it. Notably, Goldman Sachs does not believe in the six-pronged approach of U.S. President Joe Biden to fight the virus, which is matched by the geopolitical worries surrounding the recent hurricane and will continue to impact the mood.
Gold fails to retrace its losses from the monthly support line, as the metal’s brief Simple Moving Averages (SMAs) reflect poorly on its robustness. Having said that, purchasers are also confronted by slow MACD indications and the Momentum line. As a result, more weakening in the metal toward reviewing the rising support level from August 19, at $1,784, appears likely. However, the latest declines near $1,782 strengthen the downward restrictions before solidifying the bearish advance into the August 09 bounce peak near $1,752.
XAU/USD CHART. Source: Tradingview.com
Alternatively, recovery advances require a sustained run-up above the confluence of the 50 and 100-SMAs at $1,804 to verify the upward trend into the monthly high near $1,834. Gold dealers, on the whole, are preparing for an incursion but seeking comfort ahead of important US inflation data.