The yellow metal prices extended its previous week winning streak and were moving above $1,970 level, possibly due to the broad-based U.S. dollar weakness, triggered by the downbeat prints of America's Core PCE data. The greenback was also pressured by the Federal Reserve Chairman Jerome Powell's recent push for flexible monetary policy despite if the inflation runs a bit past-2.0% target for a while. Thus the U.S. dollar fresh weakness could be considered as the major factor behind the gold's bullish run-up.
Moreover, the U.S. Congress struggled over the COVID-19 stimulus package, and the US-China tussle also favored the safe-haven metal. Apart from this, the gold gains were further bolstered by the clear break of a descending trend line from August 07. On the contrary, the market risk-on tone, possibly supported by the reports concerning the preparation of the COVID-19 vaccine, became the key factor that kept the lid on any further gains in the safe-haven assets. At this time, the yellow metal prices are currently trading at 1,942.80 and consolidating in the range between 1,964.39 - 1,976.49.
Despite the on-going Sino-American tussle and worries concerning the U.S. stimulus package, the market risk sentiment remained positive with Wall Street hugging the buyers, and S&P 500 Futures hit the record high above 3,500. Moreover, the U.S. 10-year Treasury yields were flat around 0.72%. This, in turn, undermined the safe-haven U.S. dollar and contributed to the bullion gains. Also weighing on the U.S. dollar was the downbeat Core PCE data.
The Fed Chair's Average Inflation Targeting (AIT) strategy, allowing inflation to go high past-2.0% target, also weighed on the U.S. dollar and extended support to the gold. Meanwhile, the market traders did not give any major attention to the upbeat number of U.S. Consumer Sentiment and Chicago Fed Manufacturing Index. However, the losses in the U.S. dollar kept the gold prices higher as the price of gold is inversely related to the price of the U.S. dollar. Whereas, the U.S. Dollar Index that tracks the greenback against a basket of other currencies dropped by 0.09% to 92.293 on the day.
If talking about the US-China relations, the Sino-China tensions remained on board with U.S. President Trump's latest remarks that suggested an end to reliance on the Dragon Nation. Apart from this, the U.S. policymaker's long-lasting struggle over the coronavirus (COVID-19) aid package and the coronavirus mixed signals kept challenging the risk-on market sentiment and helped the safe-haven metal. The White House Chief of Staff Mark Meadows recently blamed the House Speaker Nancy Pelosi over the deadlock on a new coronavirus relief bill. Also challenging the risk-on market tone could be the Oxford University Professor Richard Peto's statements that cited fears of a worsened situation of crisis if countries keep rushing to un-approved vaccines.
At the coronavirus front, the virus numbers from the important economies, such as America, Brazil, and India, keep reporting the virus cases and propel yellow-metal prices. It's worth reporting that there are over 25.1 million cases globally as of August 31, as per the Johns Hopkins University data. As in result, the U.S. health official Dr.Fauci recently revived the hopes of the early vaccine. Previously, U.S. President Donald Trump has pushed for the pandemic's cure, which kept the market trading sentiment positive.
On the other hand, Japan's industrial production rose by 8% month-on-month in July, against anticipated growth of 5.8% and June's 1.9% growth. But retail sales saw a 2.8% drop year-on-year in the same month but missed the forecasted decline of 1.7% but smaller than June's 3.9% fall.
Looking ahead, the market traders will keep their eyes on the Japanese Unemployment Rate for fresh direction. In the meantime, Japan's Final Manufacturing PMI will also be key to watch.
Daily Support and Resistance
Pivot Point 1959.29
On Monday, the precious metal gold is trading at the 1,966 mark, staying beneath an immediate resistance mark of 1,976. Closing of candles beneath this mark may direct selling unto 23.6%, which may support gold at 1,963. Beneath this, the precious metal pair XAU/USD may gain support at 1,957 level, which is prolonged by 38.2% Fibo mark. The XAU/USD has formed a symmetric triangle pattern on the 4-hour chart. An upward breakout of the 1,976 level can lead gold prices towards a 2,006 level. Good luck!