Gold – XAU/USD Analysis – June 28, 2021

Sideway Channel Continues to Play!

Gold prices were closed at $1777.80 after placing a high of $1791.00 and a low of $1773.60. Gold remained on a positive note during the trading session on Friday and posted its first weekly gain in four.

Since its sudden fall from the $1900 level, gold remained on a positive foot this week. However, the difference was very low compared to the steep fall in gold prices during previous weeks. The positive shift in gold was driven by the recent deal on U.S. infrastructure spending that made U.S. dollar weak. Meanwhile, the inflation data also added pressure on the U.S. dollar and helped gold prices to stage a rebound.

On Thursday, President Biden and a bipartisan group of centrist senators reached a deal on an infrastructure plan for the nation worth $1.2 trillion. This spending plan helped bullion gather strength against the U.S. dollar as it has to be financed to a substantial range with higher debts that could weigh on the greenback. The progress on the plan extended weight on the U.S. dollar, and hence, gold moved higher.

Meanwhile, the gains in gold remained limited as the bullion was under pressure from last week's U.S. Federal Reserve statement. The Fed maintained a surprisingly hawkish tone and said that it would raise its interest rates two times in 2023 and look out for the data to find ways to start tapering the asset purchases. On the data front, at 17:30 GMT, the Core PCE Price Index dropped to 0.5% against the expected 0.6% and weighed on the U.S. dollar that added further gains in gold prices. In May, the Personal Income dropped to -2.0% against the forecasted -2.5% and supported the U.S. dollar that limited the rising price of gold. However, Personal Spending declined to 0.0% against the expected 0.4% and weighed on the U.S. dollar that pushed gold higher.

At 19:00 GMT, the Revised UoM Consumer Sentiment fell to 85.5 against the predicted 86.5 and weighed on the U.S. dollar, adding further upside momentum in gold. The Revised UoM Inflation Expectations remained flat at 4.2%. The key U.S. inflation gauge monitored by the Federal Reserve dropped in May and weighed on the greenback along with the Personal Income and Consumer Sentiment. However, Personal Spending remained in favour of the U.S. dollar but failed to keep the greenback higher against the bullion on Friday.

As Fed's chairman Jerome Powell has said that rising prices will not be the only determinant of interest rates decisions by the Fed, the two Fed officials still warned on Friday that inflation could surge more than policymakers' forecasts in the near term. These mixed signals from Fed kept gold prices under pressure as gold is considered an inflation hedge, and it also benefits from a lower interest rate environment. The opportunity cost of holding bullion was often reduced in such circumstances and proved beneficial to gold.

Furthermore, the rise in gold prices during the week could also be attributed to the increase in coronavirus cases from different countries worldwide, especially in the Asia-Pacific region. A fresh wave of coronavirus started in the Asia-Pacific region and caused its countries to re-impose restrictions to control the spread of the virus.

According to World Health Organization, the Delta coronavirus variant has spread in more than 85 countries, and it is the most contagious of any variant of COVID-19 so far identified. The pandemic has killed about 4 million people worldwide; however, the vaccination has helped reduce the number of cases in many wealthy nations, while the Delta variant of COVID-19 remains a concern. Indonesia saw more than 21,000 cases in a single day, and Moscow recorded 144 COVID-19 deaths in a single day, which resulted in fresh lockdown measures in many countries belonging to the region. This helped gold prices remain on the green note as the safe-haven status of bullion emerged in the market with the rising number of coronavirus cases.

Gold Intraday Technical Level

Support Resistance

1769.30 1784.80

1763.35 1794.35

1753.80 1800.30

Pivot Point: 1778.85

Gold - XAU/USD - Technical Outlook

Gold price continues to trade choppy at a 1,783 level, maintaining a narrow trading range of 1,796 – 1,765 levels. On Monday, the U.S. economy isn’t expected to release any high impact economic event, therefore, the odds of a breakout or a price action seems pretty low. Technically, the precious metal gold has completed 61.8% Fibonacci retracement level at 1,769 and this level continues to support gold price today. On the daily timeframe, the Fibonacci indicator offers resistance at 1,795 and 1,822, which are 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!