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  • Gold trims Asian session losses but still in the red for second consecutive day.
  • US Treasury yields remain depressed for fourth day, inflation expectations recover.
  • Fedspeak defends easy money policies despite disagreement over inflation fears.
  • US data, Fed remain as the key catalysts.

Update: Gold extended its directionless price move for the third consecutive session and remained confined in a range around the $1,880 level, or just below multi-month lows touched last week. Investors have been scaling back their expectations for an earlier than anticipated Fed lift-off amid easing fears about runaway inflation in the US. This was evident from the ongoing decline in the US Treasury bond yields, which was seen as a key factor that acted as a tailwind for the non-yielding gold.

In fact, the yield on the benchmark 10-year US government bond fell below the 1.60% threshold for the first time in two-week and dragged the US dollar Index to the lowest level since January. A weaker USD provided an additional boost to dollar-denominated commodities, including gold. That said, an extended rally in the global equity markets kept a lid on any strong gains for the safe-haven XAU/USD.

From a technical, the range-bound price action might still be categorized as a bullish consolidation phase amid slightly overbought RSI on the daily chart. However, it will still be prudent to wait for a sustained move beyond the $1,890 area before positioning for any further appreciating move. Investors now look forward to the US economic docket, highlighting the release of the Conference Board’s Consumer Confidence Index. This, along with the US bond yields, will influence the USD price dynamics. Apart from this, the broader market risk sentiment might further contribute to producing some trading opportunities around gold.

Previous update: Gold (XAU/USD) regains upside momentum following its bounce off intraday low even as the buyers struggle around $1,879, down 0.10% intraday, heading into Tuesday’s European session. In doing so, the commodity prices decline for the second day in a row even as the US dollar and Treasury yields stay pressured. The reason could be traced from mixed Fedspeak and a run-up in the inflation expectations, not to forget cautious sentiment ahead of Friday’s key US data.

Fed policymakers shy from accepting inflation fears”¦

US inflation expectations, as measured by the 10-year breakeven inflation rate according to St. Louis Federal Reserve data extends Friday’s recovery moves toward the highest since April 2013, marked earlier in the month. While the same suggests upbeat market mood and favors gold prices, fears of inflation pushing the Fed to dial back the easy money weigh on the risk-sentiment and tame the yellow metal buyers.

Alike the mixed sentence, the mood at the US Federal Reserve is also the same even as some more Fed policymakers like Kansas City Federal Reserve President Esther George join Dallas Fed President Robert Kaplan on the need for tapering talks. However, the defenders like Fed Governor Lael Brainard and St. Louis Fed President James Bullard are also on the line and make the case interesting for gold traders.

Amid these plays, each incoming data becomes important for the US Treasury yields that recently weighed on the US dollar and helped the gold buyers. As a result, Monday’s downbeat figures of the US Chicago Fed National Activity Index backed corrective pullback of gold.

Hence, today’s US Conference Board Consumer Confidence figures for May will be the key for intraday moves while Durable Goods Orders for May and the second reading of Q1 US GDP can entertain gold traders afterward. Though nothing becomes more important than Friday’s US Personal Consumption Expenditure (PCE) Price Index for April, expected 3.0% versus 1.8% YoY, the reason is that the price gauge is the Fed’s preferred index for inflation measurement.

It should also be noted that the Fedspeak, coronavirus (COVID-19) updates and US Treasury yield moves will also be important for near-term gold prices forecast. Overall, gold remains on the bull’s radar amid inflation fears.

Technical analysis

Contrary to the fundamental strength, gold prices flash mixed signals while looking from the technical perspective.

While a bullish crossover and upbeat MACD conditions pamper gold buyers, a five-week-old rising wedge and Monday’s ‘evening star’ bearish candlestick probe the quote’s further upside.

Hence, today’s closing will be important as a downside break of the previous day’s low near $1,872 could negate the price-positive signal by the 50-day and 100-day SMA, which in turn highlights the rising wedge’s support line close to $1,850 for bears’ entry.

Alternatively, an upper line of the stated wedge near $1,892 guards gold’s short-term upside and a break of which will help gold bulls to battle $1,900-1901 hurdle comprising mid-November 2020 top and early January 2021 lows.

Gold daily chart

Trend: Sideways