Gold Price Forecast: XAU/USD up little around $1,735 area, lacks follow-through ahead of US CPI – FXStreet

Gold traded with a mild positive bias through the early European session, albeit lacked any follow-through and was last seen hovering around the $1,733-35 region. The XAU/USD, so far, has struggled to capitalize on Monday’s rebound from the flash crash to the lowest level since late March and has been oscillating in a range over the past two trading sessions. Concerns about the economic fallout from the fast-spreading Delta variant of the coronavirus extended some support to the safe-haven precious metal.

That said, expectations for an early tapering of the Fed’s massive monetary stimulus acted as a headwind for the non-yielding gold and capped the upside. The incoming US macro data, especially Friday’s blockbuster NFP report, marked another step towards the Fed’s goal of substantial further progress in the labour market recovery. This, in turn, forced investors to bring forward the likely timing for policy tightening. Moreover, the Fed officials have also started to guide the market towards an early tapering of the massive pandemic-era stimulus and higher interest rates as soon as 2022.

In fact, Atlanta Fed President Raphael Bostic said on Monday that the Fed could begin tapering between October and December, or earlier if there is another month or two of strong job gains. Adding to this, Boston Fed President Eric Rosengren noted that the US central bank should announce in September that it will start reducing the pace of its monthly purchases of Treasury and mortgage bonds this fall. Separately, Chicago Fed President Charles Evans said on Tuesday that the economy is on track to satisfy the Fed’s threshold to begin tapering its $120 billion in monthly asset purchases. Evans, however, suggested he was not ready to support announcing a tapering of bond purchases in September.

Nevertheless, the repricing of a sooner than expected move by the Fed pushed the yield on the benchmark 10-year US government bond to the highest level since July 14, closer to the 1.37% threshold. This, in turn, provided a goodish lift to the US dollar, which was seen as another factor that acted as a headwind for dollar-denominated commodities, including gold. The market focus now shifts to the release of the US consumer inflation figures, which will influence expectations about the Fed’s next policy action and provide a fresh directional impetus to the XAU/USD.

Technical levels to watch

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.