Gold Price Analysis: XAU/USD consolidates in a range near $1715, Powell’s speech awaited

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  • Gold witnessed a modest short-covering bounce amid slightly oversold conditions.
  • An uptick in the US bond yields, sustained USD buying capped any further gains.
  • Investors look forward to Powell’s speech for some meaningful trading impetus.

Gold refreshed daily tops, around the $1723 region during the early North American session, albeit quickly retreated thereafter. The commodity was last seen hovering around the $1715-16 region, up around 0.10% for the day.

The precious metal managed to gain some positive traction on Thursday and moved away from nine-month lows, around the $1700 mark touched in the previous session. The uptick lacked any obvious fundamental catalyst and could be solely attributed to some short-covering amid oversold conditions.

Following the recent sharp fall witnessed since the beginning of this year, investors opted to lighten their bearish positions ahead of the Fed Chair Jerome Powell’s scheduled speech. That said, a combination of factors kept a lid on any runaway rally for the XAU/USD, at least for the time being.

Expectations for a relatively faster US economic recovery continued underpinning the US dollar, which, in turn, capped gains for the dollar-denominated commodity. The optimistic US economic outlook was supported by the progress on COVID-19 vaccinations and a massive US fiscal spending plan.

The reflation trade has been fueling speculations about an uptick in inflation and raised doubts that the Fed would retain ultra-low interest rates. This was evident from an uptick in the US Treasury bond yields, which further held bulls from placing bets around the non-yielding yellow metal.

Apart from this, a solid intraday bounce in the equity markets further undermined the safe-haven XAU/USD. On the economic data front, the US Initial Weekly Jobless Claims rose to 745K in the last week, lower than 750K expected, albeit did little to provide any meaningful impetus.

Meanwhile, the downside remains cushioned as investors await Powell’s comments on the risk of a rapid rise in long-term borrowing costs. This makes it prudent to wait for some strong follow-through buying or a sustained break below the $1700 round-figure mark before placing fresh directional bets.

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