Gold – XAU/USD Analysis – July 13, 2021

U.S. Inflation Figures in the Limelight!

Gold prices were closed at $1807.50 after placing a high of $1810.90 and a low of $1791.50. Gold dropped on Monday during early trading hours as the U.S. dollar gained some ground. However, the precious metal managed to recover its daily loss and ended its session with minor gains.

The U.S. dollar was strong across the board as investors were cautiously looking forward to the U.S. inflation data that could influence the timeline of the Federal Reserve for tapering the bond purchases. On Tuesday, the highly awaited U.S. Consumer Price Index report will be released to give some hints about the decision of the Federal Reserve related to the tapering of bond purchases.

If inflation data remains concerning, the Fed will move with tapering, but if the data about inflation becomes benign, the Fed will feel less need for tapering that could benefit precious metals. Gold fell to its worst month since November 2016 in June after a surprise hawkish tilt by the U.S. Federal Reserve. Fed announced that it might start increasing interest rates in 2023 to 0.6% from the current level of 0.25%. HigherHigher interest rates increase the opportunity cost of holding non-yielding bullion. Meanwhile, the U.S. Dollar Index that measures the greenback value against the basket of six major currencies remained green for the day and reached 92.42 that weighed on the yellow metal prices, and kept the XAU/USD limited gains.

Furthermore, on Monday, the New York Federal Reserve Bank President, John Williams, said that the purchases of mortgage-backed securities and Treasury securities from the Federal Reserve were both affecting interest rates and overall financial conditions. He added that one group did not have a significantly larger impact on the housing market. He said that both of them affect the interest rates; therefore, both affect the cost of housing. He also repeated his comments that the U.S. economy was yet far from the substantial further progress threshold set by the Central bank for reducing the asset purchases. He rejected to offer a timeline for starting the process of tapering and said that when the time comes, it would be natural for Fed to ease asset purchases and adjust interest rates. These comments from Williams also supported the U.S. dollar and kept gold under pressure throughout the day.

The precious metal managed to end its day with minor gains on the back of concerns over the highly contagious Delta variant of the coronavirus. The U.S. saw the daily count of coronavirus cases rise above the 20,000 level for three days in a row. These levels have not been seen since May, but now the spread of the Delta variant of coronavirus, especially in the areas of low vaccination, has caused a rising number of infections in the United States.

As perthe Centers for Disease Control and Prevention director, Rochelle Walensky has said that more than 9 in 10 recent coronavirus cases have occurred in countries with vaccination rates lower than 40%. These concerns kept the safe-haven appeal alive in the market, and hence, gold gained against the U.S. dollar on Monday’s trading session despite the strength in the greenback.

Gold Intraday Technical Level

Support Resistance

1795.70 1815.10

1783.90 1822.70

1776.30 1834.50

Pivot Point: 1803.30

Gold - XAU/USD - Technical Outlook

On Tuesday, the precious metal gold is trading with a bullish bias at a 1,809 level. On the 4 hour timeframe, gold has tested and formed a double top pattern at 1,812 levels. Closing of candles below this level is supporting sellers. However, the bullish breakout of this level can expose the XAU/USD price towards the 1,818 level. As we can see on the 4-hour chart, gold has formed a bearish engulfing candle below 1,812 resistance levels. That’s adding solid bearish pressure on gold; however, the leading and lagging technical indicators favor a bullish bias. The 50 periods EMA supports gold at 1,804 level while the MACD is also closing histograms in the buying zone. Today, the primary focus will remain on the U.S. CPI and Core CPI figures as these have the potential to drive sharp price action in the gold and dollar-related pairs. All the best!