The price of gold (XAU/USD) retreated to an intraday low near $1,795 on Monday's Asian trading session due to a stronger US dollar. To counter this, the market's recent caution in anticipation of this week's Federal Open Market Committee (FOMC) meeting minutes has been bolstered by negative sentiment and catalysts from China.
As a wave of risk aversion supports demand for the dollar as a shelter, the US Dollar Index (DXY) licks its wounds at 105.75. The Fed officials' reluctance to applaud the recent decline in inflation as well as concerns about the economy in China and Europe are other factors that keep the dollar solid.
Recently, China's retail sales decreased to 2.7% YoY in July from 5.0% predicted and 3.1% from the previous month, while industrial production (IP) decreased slightly to 3.8% from 3.9% from the previous month and 4.6% from market expectations. China's July inflation data also decreased over the previous week, which led the People's Bank of China (PBOC) to lower the interest rates on its one-year medium-term lending facility (MLF) by 10 basis points (bps). Because China is the world's largest consumer of commodities, news about the country is likely to have an impact on XAU/USD values.
Amidst a sharp fall in Russia's energy exports to the old continent as a result of the bloc's sanctions against Moscow for its invasion of Ukraine, economic worries are also apparent in Europe.
The news that numerous US congressmen are visiting Taiwan following House Speaker Nancy Pelosi's visit appeared to have increased tension concerns over the weekend, which in turn affected gold prices.
The Wall Street Journal (WSJ) has hinted that US President Joe Biden and his Chinese counterpart Xi Jinping will likely meet, which might encourage a risk-taking attitude. News reports claiming improved coronavirus conditions in Shanghai, China's financial center, also helped lift the atmosphere.
In other places, weaker US Consumer Price Index (CPI) and Producers Price Index (PPI) readings were able to allay market concerns about inflation. Thomas Barkin, president of the Richmond Federal Reserve (Fed) Bank, stated on Friday that he still wants to hike interest rates further in order to contain inflation. According to Reuters, Barkin said on CNBC, "I'd like to see a period of sustained inflation under control, and until we get that I think we really are going to have to raise rates into restrictive zone."
The US 10-year Treasury rates, which reflect the sentiment, are still under pressure at approximately 2.83 after registering weekly losses on Friday night. Further, S&P 500 Futures show intraday losses of 0.25 percent, whilst Japan's Nikkei 225 is up 2.65 percent as of the time of publication. It's important to remember that Wall Street rose on Friday.
Gold traders may wait for Wednesday's Fed Minutes for more clarity after tracking the risk catalysts earlier. However, the August NY Empire State Manufacturing Index, which is predicted to be 8.5 vs 1.1 previously, could provide quick guidance.
Technical Assessment
Gold price reverses from the 61.8% Fibonacci retracement of the June-July fall to post its largest daily loss in over a week. However, the RSI (14) decline also supports the most recent XAU/USD weakening.
The 50-SMA level near $1,784 must first confirm the pullback swings before they can point gold sellers in the direction of the prior resistance line from June 16, which is now near $1,760 as of the time of the press.
The 200-SMA and 38.2% Fibonacci retracement level converging near $1,754 appears to be a tough nut for the metal sellers to break, it should be observed.
Alternately, a fortnight-old resistance line at $1,811 functions as an additional filter to the north, so an upward clearance of the 61.8% golden ratio, close to $1,805, could not be above to boost the XAU/USD values.
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