Gold prolonged its last day’s drop from the extremely significant 200-day simple moving average (SMA) on Thursday and witnessed substantial orders trading for the second consecutive day. Already in the week, the XAU/USD was pulled nearer to the monthly fall low points in the $1,780 zone by the negative trend. Notwithstanding signs of slowing inflation in the United States, traders continue to expect the Federal Reserve to begin winding down its massive stimulus program from the Pandemic Period sometime this year. Consequently, it was believed to be a significant influence in diverting streams out from the non-yielding precious metal.
Meanwhile, fears over the quickly spreading COVID Delta variant, combined with a slowing global economy, did nothing to assist the comparatively safe Gold pair, XAU/USD, gain any headway. A slow US dollar market action, which frequently helps dollar-denominated assets such as Gold, did not discourage the bulls either this time. With the recent fall, the yellow metal has wiped out all of its weekly gains and seems to be headed for further losses. Confirmation of the bearish perspective will need a clear breach below the $1,780 linear resistance level, which would also open the way for the continuation of the current decline from the $1,832-34 support level.
Earlier Report On The XAU/USD Pair
Gold (XAU/USD) is trading at $1,792.50, down $1.50 from yesterday’s close. Despite the US Consumer Price Index (CPI) supporting equities and dragging down US Treasury yields, Gold failed to benefit from Wednesday’s US dollar weakness. The rationale is the ECB’s cautious optimism, as well as strong September and August New York Empire State Manufacturing and Import-Export Inflation Figures. “The market may be overrating challenges to global projected growth,” said Executive Board Member Isabel Schnabel.
Economist Philip Lane of the ECB expressed satisfaction that the central bank’s accommodative fiscal policy is helping to grow core inflation in the Eurozone. An earlier market reaction to Australia’s trilateral security pact with the UK and the US that included nuclear-powered submarines is worth noting. Virus outbreaks in Australia, China, and New Zealand also affect investor risk and Gold prices. Notably, the US has invited the UK to next week’s White House diplomatic meetings, raising market concerns that the Western allies are once again gearing up for a clash with China.
Along with a reversal from a 17-day-old horizontal resistance, Gold investors’ inability to maintain the 100-SMA breakout points at the assets’ fragility shows the assets weakness, which is further reflected by a downward sloping RSI line. As a result, Gold traders are well-directed toward the monthly support line, which is now located at $1,785. A break below the indicated support line, on the other hand, will pave the stage for a further decline to the mid-August low points under $1,770. Meanwhile, the metal’s relatively brief upside is limited by the 100-SMA and the horizontal region containing several peaks established since August 24, separately at $1,804 and $1,808-09.
XAU/USD CHART. Source: Tradingview.com
Additionally, a two-month-old region at $1,834 acts as a major barrier, limiting Gold’s upward potential to the $1,900 level. The commodity prices, on the whole, remain confined between a horizontal resistance level and an upward support line.