Gold is picking up the bid tone in European trading, taking advantage of the retreat in the US Treasury yield and the dollar across the curve. The risk-off action in the European equities, amid rising concerns over the rapid spread of the Delta plus covid strain, lifts gold’s safe-haven appeal. At the time of writing, gold price is advancing 0.45% on the day to trade at $1784, poised for the first weekly gain in four. Despite the rebound, gold’s upside appears capped around $1794 ahead of the US PCE Inflation data, which shed more light on the inflation picture and the Fed’s next policy move.
Gold (XAU/USD) stays on the front foot, picks up bids to $1,780, as market players brace for Friday’s European session. In doing so, the yellow metal cheers the US dollar weakness, up 0.30% intraday and snapping the three-week downtrend, ahead of the key inflation figures.
While the pre-data cautious sentiment could be spotted behind the greenback’s downbeat performance, the risk-on mood also cuts the USD’s safe-haven demand and adds gains to the gold prices. That said, the US dollar index (DXY), a gauge of the US currency versus the major six counterparts, snaps a two-day run-up with 0.05% downside near 91.77 by the press time.
Among the key risk catalysts, US stimulus and trade headlines were the major favor to the market sentiment. US President Joe Biden’s ability to deliver promised stimulus and optimism concerning the US-EU trade relations, per German Trade Minister Peter Altmaier, keep gold buyers hopeful.
On the contrary, Australia’s local lockdowns and the EU’s rejection to have a summit with Russian leader Vladimir Putin, coupled with the Fed’s recalling of the pandemic-led relief measures for the large banks, test the market sentiment and gold. Furthermore, fears of the Delta variant of the coronavirus (COVID-19) become an extra challenge to the risk-on mood but get fewer accolades.
Against this backdrop, stock futures are mildly bid and the US 10-year Treasury yields also retreat by the press time. The same favor gold prices due to its risk-barometer status.
Looking forward, May’s monthly reading of the Personal Consumption Expenditure (PCE) inflation figures becomes the key for today. Also important will be how the Fed policymakers react to the inflation fears. Forecasts suggest confirmation of the Fed’s last week’s hawkish tilt, which in turn may test the gold bulls. However, softer inflation figures will propel the upbeat Fedspeak and buoy risk appetite, also helping the gold prices to keep the recovery moves.
Technical analysis: Bulls roll-up sleeves
Gold prices battle a two-week-old falling resistance line after bouncing off short-term key horizontal support. In addition to the sustained bounce off two-month-old important support, bullish MACD signals and upward sloping MACD lines also keep the gold buyers hopeful.
However, a clear upside break of $1,781 becomes necessary for the bulls to refresh the weekly top with $1,797. Following that, May 13 low near $1,809 and the early May tops surrounding $1,845 could test the commodity’s upside moves.
Though, gold bears remain hopeful until the quote stays below the 200-SMA level of $1,859. Meanwhile, a downside break of $1,7960 won’t be a big favor for gold sellers as they need to break the $1,756 support, comprising March top and late April low, to aim for multiple supports near $1,720. Overall, gold is up for a fresh rise but bulls await a clear break of immediate hurdles.
