Spot Gold retargets $1,700 on renewed USD strength: After moving sideways near $1,730 during the first half of the day on Tuesday, the gold pair came under bearish pressure and was last seen losing 0.6% on the day at $1,717.
In the absence of high-tier macroeconomic data releases, a more-than-1% increase seen in the 10-year US Treasury bond yield seems to be helping the USD continue to outperform its rivals. Currently, the US Dollar Index is at its highest level in nearly three weeks above 93.10. Earlier in the session, the US Bureau of Labor Statistics reported that Unit Labor Costs in the US rose by 1% in the second quarter after declining by 2.8% in the first quarter.
Following Friday’s selloff, gold suffered heavy losses at the start of the week and lost more than 4% in a two-day slide. Although gold managed to erase a portion of its daily losses in the second half of the day on Monday, it is having a difficult time extending its recovery. As of writing, the pair was virtually unchanged on the day at $1,730.
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The unabated USD strength on the back of hawkish Fed commentary and upbeat data releases continue to force gold to stay on the back foot.
On Monday, Richmond Fed President Thomas Barking noted that the Fed has made substantial further progress toward the taper benchmark. Similarly, Atlanta Fed President Raphael Bostic added that he could see the Fed reducing purchases between October and December. Meanwhile, the monthly report published by the US Bureau of Labor Statistics revealed that the number of job openings on the last business day of June reached a new series-high of 10.1 million.
Reflecting the greenback’s strong performance against its rivals, the US Dollar Index is staying afloat at its highest level in nearly three weeks above 93.00.
Later in the session, the Nonfarm Productivity and the Unit Labor Costs data for the second quarter will be featured in the US economic docket. Moreover, investors look for fresh clues regarding the timing of asset tapering when Cleveland Fed President Loretta Mester and Chicago Fed President Charles Evans speak at 1400 GMT and 1830 GMT, respectively.
More importantly, July Consumer Price Index (CPI) data from the US will be watched closely by market participants on Friday. Commenting on gold’s recent action, “the gold market would stay sensitive to inflation-driven data and US taper talk, so watch out for tomorrow’s US July CPI data,” said Benjamin Wong, Strategist at DBS Bank.
Spot Gold Technical Outlook & Report
Key technical levels remain intact on Tuesday as gold fluctuates in a relatively narrow range. In the meantime, the Relative Strength Index (RSI) on the daily chart stays below 30, suggesting that gold could look to correct its oversold conditions before pushing lower. The former support level at $1,750 now aligns as the initial resistance ahead of $1,760 (static level). A daily close above the latter could help gold go into a consolidation phase in the near term.
On the flip side, $1,730 (static level) is the first target on the downside in case gold comes under renewed bearish pressure. $1,700 (psychological level) aligns as the next key support ahead of $1,687 (Aug. 9 low).
- Gold stays relatively quiet following Monday’s sharp decline.
- XAU/USD could stage a technical correction before the next leg down.
- A daily close above $1,760 could put gold in a consolidation phase.
- Metals rose during the American session; silver lagged gold.
- Silver is well supported, for now, above $23.20.
Silver Finds Support Above $23.20 and Recovers Modestly
Silver is marginally lower on Tuesday, as it remains far from the $22.10 bottom of the crash it suffered on Monday. During the American session, Silver bottomed at $23.22. The metal again was able to find support around the $23.20 area and bounced to the upside.
The upside in silver remains limited despite gold rising almost $10 in a few minutes. Silver is following gold with the recovery but at a slower speed. Both metals managed to recovery despite higher US yields but supported by an improvement in risk sentiment.
Volatility eased during the last hours but is set to remain at extreme levels on the coming session, even as metal stabilize. On Wednesday, inflation data from the US is due, and it will be watched closely as it could affect expectations about Fed’s monetary policy.
Silver Key Support at $23.20
After the sharp decline on Monday, the outlook is still bearish for silver. In the very short term a break above $23.45 (downtrend line) should alleviate the bearish pressure; and would clear the way for a test of the daily high at $23.68.
On the flip side, Silver has a critical support around $23.20. A break lower would expose the $23.00 area that if broken, should trigger a bearish acceleration.