Gold – XAU/USD Analysis – July 14, 2021

Fed Chair Powell Testifies

The safe-haven-metal price succeeded in extending its previous-day winning streak and picked up some further bids around above $1,810 level on the day as the downbeat market sentiment, triggered by the resurgence of the coronavirus (COVID-19), tends to underpin the safe-haven gold. The fears of the covid resurgence are getting more vital daily amid the variants' ability to spread faster, which adds further burden to market sentiment. Moreover, the pressure surrounding the market trading sentiment was further bolstered by the higher-than-expected inflation in the U.S.

This triggered bets that the U.S. Federal Reserve will tighten its monetary policy faster than expected, raising reflation fears and contributing to the downticks in the market trading sentiment. Besides this, the broad-based U.S. dollar bearish bias has also played a significant role in underpinning the dollar-dominated commodities (gold).

On the different page, the previously released upbeat U.S. data keeps challenging the market's risk-off mood. Meanwhile, the latest announcement from the Aussie PM Scott Morrison to increase emergency disaster payments to individuals and jointly funded payments to businesses also helps the market sentiment limit its deeper losses. It was seen as one of the key factors that kept the lid on any additional gains in the safe-haven gold. Gold is currently trading at 1,812.72 and consolidating in the range between 1,804.62 - 1,813.97.

Despite the previously released upbeat U.S. data, the market trading sentiment extended its previous-day poor performance and remained depressed on the day amid multiple reasons. Be it the increasing coronavirus (COVID-19) woes in the West or reflation fears; markets have all the reasons to put the trading mood under pressure. As per the latest report, the United Kingdom recorded the most covid-led deaths since April while the total infections ease in Australia from 120, the highest in 10 months to 100. Elsewhere, the death toll in New South Wales (NSW) and Queensland is increasing day by day, which keeps policymakers concerned and rushes for more jabbing in the Oz nation. Meanwhile, the U.S. authorities discuss the need for the 3rd-covid vaccine shot. Other than the covid fears, the higher-than-expected inflation in the U.S. triggered bets that the U.S. Federal Reserve will tighten its monetary policy faster than expected, raising reflation fears.

The monthly data issued by the U.S. Bureau of Labor Statistics showed that the Consumer Price Index (CPI) climbed to 5.4% yearly in June from 5% in May. This print surpassed the market expectation of 4.9% by a broad margin, which provided a temporary boost to the USD. At the USD front, the U.S. dollar dropped on the day but remained trading near a three-month high against the euro and a one-week high against the yen. The upticks in the U.S. dollar were short-lived as the investors await Fed Chairman Jerome Powell's testimony before Congress on Wednesday and Thursday. Although Powell has frequently asked that higher inflationary pressures be temporary, his testimony will be examined for any clues on when Fed will begin asset tapering and hike interest rates.

Conversely, the downbeat market sentiment could help the safe-haven U.S. dollar to limit its deeper losses. However, the continuous declines in the dollar could be associated with the cautious sentiment ahead of Fed Chairman Jerome Powell's testimony. Therefore, the weaker U.S. dollar tends to benefit dollar-denominated commodities, including gold. Aussie PM Scott Morrison announced an extension in emergency disaster payments to individuals and jointly funded payments to businesses to battle the covid-led losses, which keeps challenging the market's risk-off mood.

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

Gold is trading with a solid bullish bias at a 1,813 level, violating the resistance level of 1,811 level. On the 4 hour timeframe, gold has formed a bullish engulfing candle supporting a solid buying trend in the yellow metal. On the upside, the metal's next resistance prevails at 1,817 level, and break out of this level can expose its price towards the resistance area of 1,822 and 1,834 resistance levels. On the flip side, the breakout of 1,811 levels exposes gold prices towards the support level of 1,805 level. The leading and lagging indicators such as MACD and 50 EMA are in favor of a bullish trend. Therefore, the buying trend dominates today, especially over the support level of 1,811 level today. All the best!