Gold – XAU/USD Analysis – June 24, 2021

Eyes on Final GDP q/q

Gold was closed at $1777.30 after placing a high of $1795.45 and a low of $1773.25. Gold prices surged during the early trading session on Wednesday; however, it could not remain higher for longer and reversed its course on the late trading hours. Hence, the yellow metal remained flat throughout the day as it ended the session at the same level it started its day with.

The U.S. Dollar Index that measures the greenback value against the basket of six major currencies, ended its day with minor gains at 91.80. The greenback remained under pressure after Fed Chair Jerome Powell reassured markets and said that the central bank would continue to watch a broad set of market data related to jobs for assessing the economic recovery from the pandemic rather than rising interest rates based on fear of inflation. Whereas, the U.S. Treasury Yield on 10-year note also inched higher but remained well below the 1.5% mark that caused a muted trading for the day.

On the data front, at 17:30 GMT, the Current Account from the U.S. showed a deficit of -196B against the expected -250B and supported the U.S. dollar that added pressure on gold. At 18:45 GMT, the Flash Manufacturing PMI surged to 62.6 against the forecasted 61.5 and helped the U.S. dollar that also weighed on the yellow metal. The Flash Services PMI declined to 64.8 against the forecasted 70.0 and weighed on the U.S. dollar that added gains in the yellow metal. At 19:00 GMT, the New Home Sales dropped to 769K against the projected 864K and weighed on the U.S. dollar that pushed gold higher.

According to the Atlanta Fed President Raphael Bostic, the growth rose to an estimated 7% this year, and inflation was well above the target set by the Fed of 2%; he expected an interest rate hike in late 2022. Lower interest rates support the precious metal gold as it suggests reduced opportunity cost of holding bullion that pays no interest. After Fed reiterated a more hawkish tone last week in its monetary policy meeting, the yellow metal came under pressure and declined since then. However, the poor-than-expected Services PMI data from the U.S. reversed the movement of gold, and the yellow metal started to rise again on Wednesday.

Meanwhile, on Wednesday, Fed Governor Michelle Bowman said that the recent price increase would prove temporary. Rather than inflation being there for two to three months, it could be extended to six to nine months. Bowman added in her remarks to a Cleveland Federal Reserve Bank Conference and said that she acknowledged that prices were moving higher by the disrupted supply chains and rising demand as the economy was reopening. However, she was hopeful that these temporary factors should ease eventually. However, she was also concerned that it might take longer than anticipated for inflation to fade away.

Gold Intraday Technical Level

Support Resistance

1768.55 1790.75

1759.80 1804.20

1746.35 1812.95

Pivot Point: 1782.00

Gold - XAU/USD - Technical Outlook

On Thursday, the price of gold hasn't changed a lot as the investors seem to wait for the major economic release. It looks like today is the day for a breakout as the U.S. economy will release its Final GDP data. The focus will remain on the U.S. final GDP figures, and the U.S. economy is expected to grow at a steady pace of 6.4%. Any significant change in GDP has the potential to drive dramatic price action in gold. Gold continues to trade in a narrow trading range of 1,796 – 1,765 levels. 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. All the best!