Gold – XAU/USD Analysis – Aug 10, 2021

Choppy Session Continues

Gold prices were closed at $1733.10 after placing a high of $1753.75 and a low of $1710.95. After falling for five consecutive sessions, gold prices jumped to Monday. They reversed their course based on expectations that the Federal Reserve might take monetary action to push the U.S. dollar significantly.

The U.S. Dollar Index that measures the greenback's value against the basket of six major currencies, reached its highest in three weeks at 92.99. It's after the stronger-than-expected jobs data from the U.S., which raised the bets that the Fed might start reducing monetary support of $120 billion worth of monthly asset purchases sooner than expected. A rollback in the stimulus along with the eventual rate hike could weigh heavily on gold prices in the short term.

On Monday, two Federal Reserve officials said that the U.S. economy was growing rapidly while the job market was still far from reaching the full-employment target. The inflation was already at a level that the Fed has set as a target for the beginning of interest rate hikes. The President of Atlanta Federal Reserve Bank, Raphael Bostic, said that he would be looking closely at the progress made in the fourth quarter to reduce bond purchases. However, he said that he was open to an earlier start of tapering if the labor market keeps showing improvement at the current pace.

Meanwhile, the Richmond Federal Reserve President Tom Barkin said that inflation has already achieved the 2% target set as a threshold by the Federal Reserve. Barkin and Bostic both believed that it was one of the two requirements to be met before rate hikes can be considered and since, one has been reached its target and the other was showing improvement, there were chances that the Fed might start tapering sooner than expected.

These remarks from Fed officials showed that the central bank had discussions about tapering asset purchases. The bank was getting more detailed in its debate about what it will take to satisfy the Fed's inflation target under the new framework. These comments from Fed officials added further strength to the U.S. dollar that ultimately added pressure on the gold prices. However, on Monday, the precious metal managed to remain on the green side despite the strength of the U.S. dollar and hawkish comments from Fed officials. On the data front, at 19:00 GMT, the JOLTS Job Openings for June surged to 10.07M against the forecasted 9.27M and supported the U.S. dollar and further capped gains in the yellow metal.

Gold Intraday Technical Level

Support Resistance

1711.45 1754.25

1689.80 1775.40

1668.65 1797.05

Pivot Point: 1732.60

Gold - XAU/USD - Technical Outlook

On Tuesday, the precious metal gold continues to trade sideways, and its technical outlook remains primarily unchanged. Gold is trading with a neutral bias after falling to 1,686 support levels. On the hourly timeframe, the metal has already completed 50% Fibonacci retracement at 1,743 level, and now this level is extending support to gold.

A bullish bias continues, and gold is going after completing 61.8% Fibonacci retracement at 1,757 levels. This level will be extending solid resistance on Monday. The MACD is coming out of the oversold zone, and the closing of candles below the 1,757 level has the potential to reverse gold's bullish correction. Therefore, the investor's focus will be staying at the 1,757 level. In case of a bullish breakout of 1,757 levels, the next resistance will prevail at 1,765 areas. Bullish bias dominates today. All the best!