Gold – XAU/USD Analysis – June 10, 2021

U.S. Inflation Figures in Limelight!

Gold extended its loss for the second consecutive session and dropped below the $1900 level. However, gold remained in a tight range during the session as investors were looking ahead to the U.S. inflation data that could change the stance of the monetary policy set by the Federal Reserve. The U.S. Treasury Yield on the 10-year note fell sharply on Wednesday and reached 1.47%, its lowest level since May 07.

The U.S. Dollar Index that measures the greenback value against the basket of six major currencies, remained depressed throughout the day. It managed to recover all of its daily losses and even shifted its movement on the opposite side. The U.S. dollar dropped during the early trading hours on Wednesday but managed to recover and turned its movement upside with minor gains. Despite remained under consolidation, the U.S. dollar ended its day above the $90.15 level and added weight on precious metal prices.

The decline in U.S. Treasury yield for the second consecutive session came in after traders positioned themselves for inflation data scheduled to release on Thursday. The strong demand at a mid-day auction pushed the benchmark 10-year yield lower for the first time since May 07, below 1.49%. The declining demand for treasury yield could also be attributed to a breakdown in talks between U.S. President Joe Biden and a Republican Senator on infrastructure spending. Since there was no deal secured or negotiations were continued, and a later deal is a projector, then it means less future Treasury issuance, hence lower yields for the day.

The rising demand after the economy has reopened from the pandemic-induced lockdowns might continue to push up inflation. However, many economists have predicted that the price surges could be temporary.

Markets were moving under the notion that the CPI report on Thursday will come in better than expected and push the Federal Reserve to step back from its ultra-loose monetary policy. These expectations were driving the prices of the U.S. dollar higher and gold lower. However, the Federal Reserve officials have repeatedly said that the price pressures were temporary and would fade away.

Gold is considered an inflation hedge, and it tends to surge in value after central banks and governments around the world introduce massive stimulus measures. Now that economies have started recovering from the losses incurred due to the pandemic crisis, the Fed's expectations might start tapering increased and weighed on the yellow metal prices.

Gold Intraday Technical Level

Support Resistance

1884.33 1905.64

1874.47 1916.87

1863.24 1926.84

Pivot point: 1895.67

Gold - XAU/USD - Technical Outlook

Gold traded sideways in between a narrow trading range of 1,896 – 1,881 level. Lately, the symmetrical triangle pattern supported the metal and kept its trading within a narrow trading range. However, the strong dollar is pushing gold prices lower. As we can see, the yellow metal gold has violated the symmetrical triangle pattern on the 4-hourly timeframe, and now it's heading lower towards the next support area of 1,881 level. Continuation of a bearish trend and break out of the immediate support level of 1,881 level extends the selling trend until the next support level of 1,869 and 1,855. Gold's resistance continues to hold around 1,896 and 1,903 levels today. Let's keep an eye on the U.S. CPI figures, as these can trigger a sharp movement in gold. All the best!