• Gold consolidates the previous day’s losses, refreshes intraday high.
  • Trade jitters battle vaccine optimism, upbeat Fedspeak probe buyers.
  • DXY eases amid lacklustre US Treasury yields, cautious sentiment ahead of key US data.

Gold price is trading back and forth in a narrow range around the $1900 mark, holding onto the key support at $1900. Meanwhile, gold bulls seem to lack conviction above $1900, as the US dollar manages to preserve Wednesday’s gains amid a revival of the Fed’s tapering expectations. Firmer US Treasury yields, despite the tepid risk tone, cap gold’s bullish attempts. Technically, the overbought conditions on the daily chart appear to be playing out, as the focus now shifts towards a flurry of critical US economic releases. US Durable Good and Preliminary GDP will be eyed among other reports.

Disbelief over Fed?

The US Federal Reserve (Fed) officials have a tough time convincing the market plays that the reflation risk is transitory and the central bank isn’t on the way to tapering. The same put a safe-haven bid under the gold prices as US Treasuries, another safe-haven, seesaw of late.

Not only the doubts over Fedspeak but mixed data and challenges to the risk-on mood also helps gold to regain upside momentum. Among the ex-Fed catalysts, the US-China trade tussles and fresh coronavirus (COVID-19) concern in Asia-Pacific, mainly in Australia and Japan, seem to weigh on the sentiment, which in turn back the gold buyers.

Additionally, upcoming US Durable Goods Orders, second reading of US GDP and the Fed’s preferred gauge of inflation, namely the Core Personal Consumption Expenditure (PCE) Price Index, also probe the market’s mood. The scheduled releases are likely to portray further challenges for the US Fed policymakers in battling the reflation woes, which in turn could keep the gold prices positive.

Amid these plays, the US 10-year Treasury yield struggles to extend the previous day’s recovery moves while the US Dollar Index (DXY) drops 0.03% to 90.02 by the press time. Further, S&P 500 Futures wobble below 4,200, mildly offered recently, whereas Asia-Pacific shares trade mixed.

Given the concerns over Fed’s next action and anticipated challenges from the key US data, gold prices may remain on the front foot. However, buyers need to stay cautious in case of a negative surprise from the data, which in turn could help the US central bank officials to firmly deny reflation risk and boost the greenback, dragging the gold prices down.

Eforex India, 27th May 2021