Search ForexCrunch
  • XAU/USD gains traction as NFP disappointed.
  • Fed’s hawkishness is still weighing on the asset.  
  • Long-term forecast is bullish for the gold.    

XAU/USD traded in a relatively broader range this week. However, the price remained practically unchanged, remaining as close as possible to the level of $1787 per ounce. Two weeks earlier, the precious metals market sank heavily and so far, cannot return to its recent levels. Moreover, following the June meeting, the US FOMC changed its position on high inflation in the country, so it premeditated to increase interest rates by 0.25 basis points twice in 2023.

The news caused the Dollar Index to rise to a two-month high and the yield on 10-year US Treasury bonds, but at the same time negatively affected the quotes of precious metals. However, the missed NFP figures on increased unemployment helped yellow metal rise from the weekly lows of $1741.

XAU/USD benefitting from weaker Dollar

The Dollar king rocked the entire week until NFP data released with dismal unemployment that helped gold to seek refuge and close back positively near the close of the previous week. However, this could only be a retracement or corrective action for the US Dollar rather than a bearish trend. So, we expect a “buy the dollar dip” action coming week.

The trend towards forsaking the US Dollar as the world’s reserve currency has augmented noticeably in recent years, but the Dollar has a serious rivalry. As a result, worldwide central banks continue to actively build up their gold reserves. This trend will continue in 2021. The fresh report from the World Gold Council says, about 21% of the world’s central banks plan to buy precious metals this year.

XAU/USD long-term forecast

Analysts consider that by the end of this year, an ounce of gold could return to the price of $ 1,900, even despite the recent fall below important support levels. But the asset will have to deal with higher inflation and interest rates over the next few years. Nevertheless, even with the lower cost of the precious metal, there is sufficient value in the gold sector, especially in mining. Moreover, even if the Fed announced that it could raise interest rates in 2023, real interest rates are still negative, and the situation will not change anytime soon. As a result, gold is now in standby mode, which creates favorable conditions for mining companies.

Central banks taking an interest in XAU/USD

Current data highlights the high interest in gold from central banks, and the global crisis underscores the importance of keeping liquid assets in a reserve portfolio. Inflation is also viewed as an investment factor and may affect the asset allocation of central banks in the coming years. The World Gold Council predicts that the Central Bank will remain net buyers of the precious metal, albeit in smaller volumes than in previous decades. The WGC poll also showed no central bank plans to sell its gold reserves this year, although 4% of banks were ready to do so last year.

Delta variant increasing safe-haven appeal

Another positive factor for gold remains the growth in demand in Asia. During the peak time of the coronavirus crisis, investors and consumers in India and China – the largest markets for gold – have shown restraint in purchasing precious metals. The deferred demand for gold led to its sharp rise after the lifting of hard restrictions. This factor will support world gold prices, and after the current consolidation, investors will be able to count on continued price increases. If the trend continues, gold has a good chance of hitting $2,000 per troy ounce again. in the second half of 2021.

What’s next on the calendar?

The long weekend is followed by two main events US ISM survey and Fed meeting minutes. These two events can provide fresh impetus to the gold.

XAU/USD technical weekly forecast: What to watch?

The daily close of gold is far below the congestion of 20, 50 and 200 DMAs, indicating a neutral stance. The instrument is consolidating in a range for more than two weeks. Although the volume is a little support for the bulls, the primary variable is still the Greenback.   The $1800-16 zone is decisive for the gold. If the zone is broken, we can see the path of least resistance on the upside.

Daily chart of XAU/USD
Daily chart of XAU/USD

Looking to trade forex now? Invest at eToro!

67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.