Gold Overview
Update: Gold built on the previous day's recovery move from the vicinity of the $1,750 level, or two-and-half-month lows and gained traction for the second consecutive session on Thursday. The momentum pushed the XAU/USD back closer to the $1,780 level during the early European session, though any meaningful upside still seems elusive amid the prevalent strong bullish sentiment surrounding the US dollar. A stronger greenback tends to undermine demand for dollar-denominated commodities, including gold.
The markets have been speculating that the Fed will tighten its monetary policy if price pressures continue to intensify. The market expectations were further cemented by the overnight hawkish comments from Dallas Fed President Robert Kaplan. In an interview with Bloomberg TV, Kaplan said that they are seeing a broadening of price pressures and would prefer to taper sooner than the end of the year. This, along with a stronger ADP report, continued acting as a tailwind for the greenback and might cap gains for gold.In fact, the key USD index climbed to the highest level since April 8 and was further supported by a goodish pickup in the US Treasury bond yields. This could further collaborate to keep a lid on any meaningful upside for the non-yielding gold. Moreover, investors might also refrain from placing any aggressive bets, rather prefer to wait on the sidelines ahead of Friday's release of the closely watched US monthly jobs report – popularly known as NFP. This, in turn, warrants some caution for bullish traders.
Heading into the key event risk, traders on Thursday will take cues from the US economic docket – highlighting the release of ISM Manufacturing PMI later during the early North American session. Apart from this, the US bond yields, might influence the USD price dynamics and produce some short-term trading opportunities around gold.
Previous update: Gold price is building on Wednesday’s rebound from two-month lows of $1750, although the bulls seem to lack follow-through momentum, as the US dollar holds the higher ground. The risk-off sentiment remains at full steam amid growing concerns over the rapid spread of the Delta covid strain, especially in the Asia-pac region. Meanwhile, rising expectations that the Fed will resort to dialling back of the monetary stimulus, after the US ADP NFP Numbers outpaced expectations in June, keep the sentiment buoyed around the greenback.
Gold’s next direction will depend on the US NFP jobs report due this Friday. In the meantime, gold traders eagerly await the US ISM Manufacturing PMI for fresh dollar trades.