Gold – XAU/USD Analysis – June 18, 2021

Gold Completes 61.8% Fibonacci Retracement!

Gold prices were closed at $1777.05 after placing a high of $1826.20 and a low of $1768.00. Precious metal extended its losses for the 5th consecutive session on Thursday and reached its lowest level since April 30. Gold slipped by more than 2% on the day and reached below the $1800 level on Thursday on the back of a higher jump in the U.S. dollar after the U.S. Federal Reserve held a more hawkish tone on monetary policy.

The U.S. Dollar Index that measures the greenback value against the basket of six major currencies, rose above 92 levels after surging for three consecutive sessions. The Fed's expectations will raise interest rates in 2023 to 0.6% from the current level of 0.25%, supported by the rising prices of the U.S. dollar. A majority of Fed officials predicted at least two hikes in interest rates in 2023. However, Fed officials kept the policy support for this month to encourage recovery in the jobs sector. The announcement from Fed pushed the U.S. dollar to an over 2-month high level and weighed heavily on the yellow metal. The U.S. Treasury yields, however, remained under pressure on Thursday but failed to reverse gold prices.

On Wednesday, the Federal Reserve also signaled that it was monitoring data to know when to start tapering its monthly asset purchases of $120 billion. Since last year when the pandemic began, the U.S. central bank has been buying at least $40 billion in mortgage bonds and $80 billion in Treasury bonds to support the credit markets and the economy. On the data front, at 17:30 GMT, the Philly Fed Manufacturing Index rose to 30.7 against the expected 30.3 and supported the U.S. dollar that added in the loss of precious metal. The Unemployment claims from last week soared to 412K against the projected 360K and weighed on the U.S. dollar that limited further decline in the yellow metal. At 19:00 GMT, the CB Leading Index in June remained flat with a projection of 1.3%.

Meanwhile, the tensions between the U.S. and China are likely to worsen under the Biden administration as the relationship was going down a path of great confrontation. Some analysts believe that before elections last year, it was expected that the Biden administration would prove fruitful in terms of resolving the conflict between the U.S. and China. However, the U.S. recently has passed an expensive bill on investing a quarter of a trillion dollars in boosting domestic manufacturing to compete with China. Furthermore, President Joe Biden has also signed an executive order to expand a Trump-era ban on U.S. investment in Chinese companies that have any connection with the Chinese military. These negative developments surrounding U.S. & China kept the losses in gold prices limited on Thursday.

Gold Intraday Technical Level

Support Resistance

1754.64 1812.84

1732.22n1848.62

1696.44 1871.04

Pivot Point: 1790.42

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Gold - XAU/USD - Technical Outlook**

The precious metal gold is trading at a 1,784 level on Friday, having bounced off over 1,769 support level. The precious metal has completed 61.8% Fibonacci retracement at 1,769 level, and closing the daily candle suggests a bullish correction. On the daily timeframe, the Fibonacci indicator is suggesting resistance levels of 1,795 and 1,822 that marks 23.6% and 38.2% Fibonacci retracement levels. The MACD is showing a bearish crossover, indicating the overall trend is still looking bearish. The 50 periods EMA is holding at 1,822 level, indicating a bearish trend. Since the current market price of gold is far away from EMA, the odds of bullish correction remain high. Gold's support level stays at 1,769 and 1,750 levels. All the best!