Gold’s Bullish Bias Dominates Amid Weaker US Inflation Figures

Gold’s Bullish Bias Dominates Amid Weaker US Inflation Figures
Gold’s Bullish Bias Dominates Amid Weaker US Inflation Figures

Today, during the Asian trading session, the yellow metal failed to extend its upward rally of the previous day, drawing some offers around the $1,800 level. The gains in the precious metal stalled close to $1,800, after hitting a one-week high the previous day. The decline in the benchmark US Treasury Yields supported the current upside movement in the prices. The price action was primarily sponsored by the softer-than-expected rise in the US inflation data published yesterday, which raised doubts over the Fed’s timeline for tapering monetary stimulus.

Yesterday’s weaker equity market, and concerns over the rapid spread of the  delta variant of the coronavirus and its impact on global economic recovery, was the main source of support for the safe-haven yellow metal. However, the gains were short-lived, as the strength of the broad-based US dollar is keeping the gains in gold in check, as a higher valuation of the US dollar makes GOLD expensive for holders of other currencies.

In addition to this, the global equity markets flashed green at the start of the day, backed by the hopes of faster administering of vaccinations in the UK, Australia and the US. The upbeat market sentiment tends to undermine the prices of the safe-haven metal. Gold is trading at 1,802.49, and consolidating in the range between 1,801.44 and 1,804.72.

Vaccine & Stimulus Optimism

Despite the faster spread of the delta variant of COVID-19 and the US-China tussle, most recently over Taiwan, the market trading sentiment maintained its positive appearance and remained well bid on the day. The mounting hopes of getting vaccinations done quicker in the UK, Australia and the United States could favor the stock futures. It has also been observed that the World Health Organization (WHO) is pushing India to donate vaccines to African countries, as the Asian country seems to have defeated the initial virus woes and has the fastest jabbing rate in the world of late. Another factor that favours the market trading sentiment is that the US Democrats appear willing to ease their earlier demands to push forward President Joe Biden’s $3.5 trillion stimulus plan.

Stronger US Dollar

Despite the risk-on market mood, the broad-based US dollar maintained its upward rally of early in the day, remaining well bid. The US currency remains within a narrow range, as the latest US inflation data has raised doubts that the Federal Reserve is likely to start asset tapering in 2021.

Meanwhile, US data released yesterday showed that the core consumer price index (Core CPI) rose by 4% year-on-year and 0.1% month-on-month in August, and that the CPI rose by 5.3% year-on-year and 0.3% month-on-month, respectively.

The upticks in the US dollar kept the bullion prices under pressure, as the price of gold is inversely related to the price of the greenback. The US Dollar Index, which tracks the greenback against a bucket of other currencies, rose by 0.04%, to 92.648, according to the figures released at 10:55 PM ET (2:55 AM GMT).

Looking ahead, market traders will keep their eyes on any clues that confirm whether the Fed will go ahead with tapering. Meanwhile, the Retail Sales and Friday’s Michigan Consumer Confidence will also be key to watch. US Industrial Production for August is expected to ease from 0.9% to 0.5%, which could offer fresh direction too.

On Wednesday, gold is consolidating at the 1,803 mark, with an upward trend. The immediate resistance for gold lingers at the 1,808 level. In case of a bullish breakout at 1,808, gold could open up towards the next resistance mark of 1,815. Moreover, on the higher side, the subsequent resistance predominates at the 1,826 mark.

 

Daily Support and Resistance

S3 1,742.39
S2 1,770.25
S1 1,787.46
Pivot Point: 1,798.11
R1 1,815.32
R2 1,825.97
R3 1,853.83.
On the lower front, the immediate support for gold lingers at the 1,797 mark, and a breakout under this level would open the precious metal up to the 1,786 mark. The leading technical indicators, like the RSI, imply a bullish inclination in GOLD. Therefore, the bullish tendency rules over the 1,797 level and vice versa. Good luck!

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