Gold – XAU/USD Analysis – July 26, 2021

Choppy Session in Play

Gold was closed at $1801.80 after placing a high of $1810.70 and a low of $1789.10. Gold extended its loss on Friday and dropped for the 6th consecutive session amid strength in the U.S. dollar. The U.S. Dollar Index that measures the greenback value against the basket of six major currencies, surged on Friday to 93.02. The dollar remained bullish for the day that had a negative impact on the precious metal as they both move in the opposite direction. The U.S. Treasury Yields on benchmark 10-year note also surged on Friday and reached 1.311%, which added strength to the U.S. dollar and weighed further on the precious metal.

The strength in the greenback, along with the higher bond yields despite the risk-off market sentiment driven by the rising fears of the coronavirus and its impact on the economy, added extra pressure on yellow metal on Friday. The U.S. dollar remained on a positive note despite mixed economic data on the day.

At 18:45 GMT, the Flash Manufacturing PMI for July surged to 63.1 against the expected 62.0 and supported the U.S. dollar and weighed further over yellow metal prices. The Flash Services PMI dropped to 59.8 against the forecasted 64.6 and weighed on the U.S. dollar that capped further loss in gold prices.

On the flip side, the World Health Organization reported that almost all regions reported a rise in infections, and the global number of new coronavirus cases rose by at least 12% during the past week. According to the latest weekly epidemiological update, the agency reported that about half a million cases were reported each day in the previous seven days. The agency also warned against the relaxation of lockdown restrictions while the vaccination coverage was slow.

The WHO blamed the global surge of coronavirus cases on the dramatic rise of the delta variant, which has now reportedly spread to 124 countries and has become the dominant variant of the coronavirus throughout the world. The Prime Minister of France also reported that the delta variant was dominant in the country as more than 18,000 new cases were recorded in a single day.

WHO also cited that according to recent studies in Canada and China, there was growing evidence that the delta variant was more transmissible than the earlier versions of the virus. However, the exact measures of the increased transmissibility remained unclear.

The top U.S. infectious disease expert Anthony Fauci also said that the delta variant was behind more than 80% of new infections in the United States. All this virus-related uncertainty kept supporting the risk-off market sentiment, which capped further loss in the yellow metal prices on Friday.

Furthermore, the Federal Open Market Committee will begin its two-day policy meeting on Tuesday. Market traders and investors will be watching the meeting results closed to get hints of the starting date for tapering of Fed’s massive monthly debt purchases.

Gold Intraday Technical Level

Support Resistance

1800.65 1801.29

1800.34 1801.62

1800.01 1801.93

Pivot Point: 1808.98

Gold - XAU/USD - Technical Outlook

On Monday, the precious metal gold is consolidating with a neutral bais at 1,806 levels. It’s maintaining a narrow trading range of 1,809 – 1,790 levels on the 4-hourly chart. However, gold hasn’t been able to violate the double bottom support level of 1,790 level. A bearish breakout of this level was supposed to expose gold price towards the 1,774 level. On the higher side, the 50 periods EMA is extending resistance at 1,810 levels. An indicator like MACD is tossing above and below 0, suggesting indecision among investors. It looks like the traders are looking for a solid fundamental reason to trigger a breakout. A bullish breakout of 1,810 levels exposes gold prices towards 1,822 and 1,834 levels. Alternatively, the breakout of 1,790 levels exposes precious metal towards 1,774 levels. All the best!