· Gold prices edged lower on Monday as the dollar held steady, with cautious investors eyeing July’s non-farm payrolls due later this week to gauge the health of the labour market.
· The health of the labour market is an important prerequisite for the U.S. central bank to taper monetary stimulus.
· Spot gold fell 0.2% to $1,810.71 per ounce by 0332 GMT. On Friday, prices retreated from a two-week peak, after the dollar recovered slightly from a one-month low.
· U.S. gold futures fell 0.1% to $1,814.90 per ounce.
· “The market is fearful of a stronger payroll (data), which will make the dollar stronger... It will probably keep them from strapping on a lot of interest rate sensitive risks,” said Stephen Innes, managing partner at SPI Asset Management.
· The data will give investors more insight into the timeline for policy tapering, he added.
· On the technical front, spot gold may revisit its July 23 low of $1,789.98 per ounce, as it failed again to break a resistance at $1,832.80, according to Reuters technical analyst Wang Tao.
Gold (XAU/USD) kick-starts August with mild losses of 0.22% intraday, around $1,810 heading into Monday’s European session. The yellow metal managed to post a positive weekly closing by the end of Friday amid broad US dollar weakness. However, cautious sentiment ahead of this week’s US Nonfarm Payrolls (NFP), not to forget today’s US ISM Manufacturing PMI, for July weigh on the commodity prices.
Other than the traders’ wait-and-watch mood, a complex market scenario filled with the downbeat Treasury yields in the US and China battling positive Asia-Pacific equities and stock futures also trouble the gold traders. On the top, sluggish US dollar and month-start position building seem to weigh on the gold prices.
It’s worth noting that the options market was the most bullish on gold, per one-month risk reversal data from Reuters, in 2021 during July. Hence, position consolidation may have triggered the commodity’s pullback of late.
Talking about the yields, US 10-year Treasury yields drop 1.4 basis points to 1.225% whereas Chinese bond yields drop to the lowest since June 2020. The bond coupons justify the market’s fears of Delta covid variant and Japan’s government pension fund’s, the world’s largest pension fund, cut in the US bond weigh in holdings.
On the contrary, Asia-Pacific stocks cheer hopes of stimulus as US lawmakers put forward President Joe Biden’s infrastructure spending package on the Senate’s floor with the hopes of getting it through the House during this week. China is also up for a multi-billion-dollars worth of aid package to the state-backed enterprises after the IT crackdown roiled Chinese equities in recent days.
Moving on, US ISM Manufacturing PMI for July, expected 60.8 versus 60.6, may reconfirm the soft economic path of the world’s largest economy, which is the need for easy money and further gold strength. However, stronger data may renew USD buying and can extend the latest selling of the commodity. Above all Friday’s US NFP will be the key even as the Fed quietly ignored the tapering talks during the last week’s meeting.
Gold’s latest pullback from $1,833 portrays an ascending triangle bearish chart formation. However, 100-SMA restricts immediate downside.
Given the downbeat MACD and Momentum, the metal is likely to confirm the bearish chart pattern with a break of an ascending support line from June-end, surrounding $1,802.
It should be noted, however, that a horizontal line from early July could challenge gold sellers around $1,790, a break of which will confirm the double top formation and add strength to the downside momentum targeting the late June’s low near $1,750.
Meanwhile, recovery moves may struggle around $1,820 before confronting the stated double-tops near $1,834.
Though, a clear upside break of the $1,834 key hurdle could trigger a rally targeting the $1,880 theoretical mark.
Overall, gold is up for a short-term pullback but remains range-bound since early July.
· Gold Price Forecast: XAU/USD looks vulnerable amid bearish technical setup, ahead of ISM
In doing so, the yellow metal has recaptured the 100-SMA resistance now support at $1811.
However, with the Relative Strength Index (RSI) still pointing south below the midline, the downside bias remains intact.Therefore, a breach of the 100-SMA once again could call for a retest of the 50-SMA cushion.
A four-hourly candlestick closing below the latter could trigger a fresh downswing towards the bearish 200-SMA at $1797.
Further south, the bulls may seek support around the $1792 area, the previous week’s range lows.
On the flip side, if the 100-SMA support holds, then the recovery momentum could challenge the upward-pointing 21-SMA at $1816.
The next upside target is seen at the $1820 round figure.
· Among other precious metals, silver was flat at $25.46, palladium gained 0.5% at $2,672.93 and platinum rose 0.9% to $1,058.22.
· CDC study shows 74% of people infected in Massachusetts Covid outbreak were fully vaccinated
· U.S. administers 346.5 mln doses of COVID-19 vaccines -CDC
· Republican report says coronavirus leaked from China lab; scientists still probing origins
· Health experts fear unlocked England could become an incubator for new Covid variants
· Australia tightens COVID curbs as Brisbane extends lockdown, army patrols Sydney
· German retail sales jump for second month in a row
German retail sales increased much more than expected in June following an easing of COVID-19 restrictions, supporting hopes for a consumer-driven recovery in Europe’s largest economy, data showed on Monday.
The Federal Statistics Office said retail sales rose 4.2% on the month in real terms after an upwardly revised jump of 4.6% in May. The June reading was more than double a Reuters forecast for a rise of 2.0%. (Reporting by Michael Nienaber Editing by Caroline Copley)
· Asian factory activity hit by rising costs, Delta variant
sia's factories hit a rough patch in July as rising input costs and a new wave of coronavirus infections overshadowed solid global demand, highlighting the fragile nature of the region's recovery
Manufacturing activity rose in export powerhouses Japan and South Korea, though firms suffered from supply chain disruptions and raw material shortages that pushed up costs.
"Supply bottlenecks remain a constraint. But the PMIs suggest demand is cooling too, taking the heat out of price gains and weighing on activity in industry and construction," said Julian Evans-Pritchard, senior China economist at Capital Economics.
· Crackdown shows China’s ready to do ‘whatever it takes’ when it sees social problems, major Asia bank says
Dennis Lam of DBS says stock market volatility is not a consideration when China wants to address socioeconomic issues.
For sectors that face high risk of regulation, including education, e-commerce, internet and health care, it’s “prudent for the investor to basically expect the worst,” he said.
His comments come after a week of volatile trading for Chinese tech and education stocks, including two listed in the U.S.
· China wants to curb steel production. Some say it’s ‘virtually impossible’
China wants to lower its steel production this year, but that could prove difficult.
In the first half of 2021, Chinese steel mills have churned out nearly 12% more crude steel compared to the same period in 2020, according to a Wood Mackenzie note.
China produced a monthly record of 99.45 million tons of steel in May, though the number fell to 93.88 million tons in June, Reuters reported.
The steel sector is one of the biggest polluters in China, producing around 10% to 20% of carbon emissions in the country. Beijing has targeted the industry as part of its bid to reduce carbon emissions and reach net-zero by 2060.
· S.Korea says no decision on joint U.S. military drills, but exercises should not create N.Korea tension
Reference: CNBC, Reuters, FXStreet
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