Gold Price Analysis: XAU/USD hangs near multi-month lows, moves little post-US data

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  • A broad-based USD strength exerted some pressure on gold for the second straight day.
  • The risk-off mood, a modest pullback in the US bond yields helped limit any further losses.
  • The yellow metal had a rather muted reaction to the release of the US Core PCE Price Index.

Gold maintained its offered tone through the early North American session and was last seen hovering around the $1763 region, just above eight-month lows touched earlier this Friday.

The precious metal extended this week’s rejection slide from 200-day EMA and witnessed some follow-through selling on the last trading day of the week. The downfall was exclusively sponsored by a strong bid tone surrounding the US dollar, which tends to drive flows away from the dollar-denominated commodity.

The USD added to the previous day’s solid gains led by a sharp rise in the US Treasury bond yields. The US bond market has been reacting to the prospects for a strong global economic recovery amid the progress in COVID-19 vaccinations and US President Joe Biden’s proposed $1.9 trillion pandemic relief package.

The reflation trade further forced investors to price in an uptick in inflation, which was reinforced by Friday’s macro data. The US Bureau of Economic Analysis reported that the Core PCE Price Index remained unchanged at 1.5% on a yearly basis in January as against market expectations for a modest downtick to 1.4%.

Meanwhile, the negative factor, to some extent, was offset by a mixed performance in the equity markets, which extended some support to the safe-haven XAU/SUD. This, along with a modest pullback in the US bond yields, helped limit any further losses for the non-yielding yellow metal, at least for the time being.

That said, the near-term bias remains tilted in favour of bearish traders and supports prospects for further weakness. Hence, a subsequent break below the $1750 intermediate support, en-route the $1725-24 intermediate support and the $1700 mark, remains a distinct possibility.

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