Gold, XAU / USD, US Dollar, Fed, Taper Talks – Talking Points
- Gold prices after a sharp decline, there are severe setbacks
- XAU /USDthe technical attitude leaves the gold rings on the hind leg
Gold prices have come under enormous pressure since last week’s non-farm payroll report. The US announced 943,000 new jobs in July. This sparked speculation that the Federal Reserve would speed up its schedule to reduce monetary support. The US dollar won with interest sellers whose price was cunning in the Fed. A stronger Greenback will make keeping gold more expensive for foreign investors.
The XAU / USD has fallen by almost 5% since last week as the bulls retreated. Some have seen the drop in prices as an option, believing that a well-communicated Delta Covid variant could throw a wrench at the US economic recovery. However, this narrative is probably far from off at best. Due to the high vaccination rate in the US, policymakers prefer mask powers and other soft restrictions to economically crippling restrictions. In fact, the CDC reported that the daily average of shot Americans has risen to its highest level since June 18.
Moreover, the view of the hawk seems to be even more intrusive into the Federation’s group thinking. Chicago central bank president Charles Evans said earlier this week that he expected the labor market to continue. When asked about a timetable for reducing asset purchases, Mr Evans said: “We will reach a time when it is certainly appropriate to start.” This echoes the comment made by Vice-President Richard Clarida, who said earlier this month that the austerity could begin later this year.
Given Fedi’s recent comment, there is a clear path for gold above. One of the primary headwinds of gold today is the rise in real interest rates. Real interest rates reflect nominal bond yields after eliminating inflation and are considered to be one of the main underlying factors for gold in financial markets. Gold prices usually fall as real prices rise. This is because gold is an interest-free asset and higher interest rates increase the investor’s holding costs. Ten-year real returns – with a 10-year treasury inflation rate – have risen sharply since last week’s employment report. This, together with the stronger US dollar, puts the blanket against gold bulls.
Golden technical forecast
Gold prices shattered the psychologically impressive levels of 1700 and 1800, although prices recovered some of the deeper losses quickly enough to move back above 1700. However, the technical outlook remains tough. The death cross was formed below the 50-day mobile moving average (SMA) of 200 days of SMA.
The MACD trend continues to be lower, while the RSI remains over the territory sold. Prices can see resistance at the former level of support in 1760. On the downside, bears are aiming for a price level close to 1680, where the double-bottomed pattern rose earlier this year.
Golden daily schedule
The chart is created using TradingView
Written by Thomas Westwater, DailyFX.com analyst
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