Gold – XAU/USD Analysis – June 23, 2021

Eyes on U.S. Manufacturing and Services PMI

Gold was closed at $1777.80 after placing a high of $1790.15 and a low of $1772.25. Gold dropped on Tuesday as traders awaited testimony from the Federal Reserve chairman, Jerome Powell, for additional clarity on monetary policy following the central bank expressed a hawkish tone last week. Last week gold dropped by about 6% after the U.S. Federal Reserve signaled to raise its interest rate from 0.25% to 0.6% in 2023 and also gave hints about starting to taper the asset purchases. Traders were waiting to get acknowledgment from Powell. They were specifically looking to find something out of the ordinary from the prepared text during the question and answers session.

Powell said on Monday that the U.S. economy continued to show sustained improvement and established a fall in inflation from the current high levels. As a result, the U.S. Dollar Index that measures the greenback value against the basket of six major currencies extended its decline for the 3rd consecutive session and reached 91.64. The U.S. Treasury yields on a 10-year note also declined below 1.50% and remained depressed throughout Tuesday. Despite declining U.S. dollar and yields, gold failed to maintain its feet on the ground and continued falling because of the comments from Powell.

According to Fed Chair, the U.S. Central Bank had intentions to encourage a broad recovery of the job market while keeping interested lower and not raising them too quickly based only on the fear of inflation reaching higher levels. He reiterated that Fed would wait for the evidence of actual inflation rather than the inflation driven by increased demand after reopening the economy and disrupted the supply chain due to lockdowns. Any other imbalances and real inflation evidence will be used as a gauge for rising interest rates.

Powell continued that the recent high inflation readings did not represent a broadly tight economy that would need higher interest rates. He said the recent price hikes were instead due to rising demand for goods and services and bottlenecks in supplying them as the economy reopened from the pandemic. He repeated that these price pressures would ease on their own.

On the data front, at 18:59 GMT, the Richmond Manufacturing Index raised to 22 against the expected 18 and supported the U.S. dollar that dragged gold prices downwards. At 19:00 GMT, the Existing Home Sales surged to 5.80M against the forecasted 5.71M and helped the U.S. dollar that added further losses in the yellow metal.

Gold Intraday Technical Level

Support Resistance

1769.99 1787.89

1762.17 1797.97

1752.09 1805.79

Pivot Point: 1780.07

Gold - XAU/USD - Technical Outlook

The technical side of gold hasn't changed a lot as it continues to consolidate around 1,783 levels. It's been trading in between a narrow trading range of 1,796 – 1,765 level and still haven't been able to violate despite the FED Chair Powell Speech. On the 4-hour timeframe, gold has already completed 61.8% Fibonacci retracement level, and this level is still intact. On the daily timeframe, the Fibonacci tool is still offering an immediate resistance at 1,795 and 1,822 that's extended by 50% and 38.2% Fibonacci retracement levels. The leading indicator, such as MACD, is still holding below 0, supporting a selling bias in gold.

Furthermore, the 50 periods EMA is extending resistance at 1,821 level, and below this, the selling pressure remains strong. Later today, the focus will remain on Manufacturing and Services PMI, which can drive further movements in the market, especially during the U.S. session. All the best!