- Gold receives fresh buying on Monday and turns positive for the second day in a row.
- The prevailing selling bias around the dollar turns out to be a key factor driving the yellow metal.
- A positive risk tone and the outlook for more aggressive central banks continue to limit the rise in XAU/USD.
The gold attracts some buying near the $1,712 zone on Monday and turns positive for the second day in a row. XAU/USD updates its daily high, around the area of $1,726 to $1,727 during the European session, and is approaching again the maximum of a week and a half touched on Friday.
US dollar prolongs sharp pullback of last week and remains under intense selling pressure on the first day of a new week. Indeed, the dollar index, which measures the greenback’s performance against a basket of currencies, is dipping to a new monthly low, offering support to the dollar price of gold.
Given the markets have already priced in a 75 basis point Fed rate hike in September, little activity around US Treasury yields turns out to be a key factor weighing on the dollar. Apart of this, growing concerns about a deeper global economic downturn are helping to drive currency flows into gold as a safe haven.
Nevertheless, risk positive tonewhich is reflected in a generally optimistic environment in the stock markets, could act as a headwind against the precious metal. Furthermore, prospects for more aggressive monetary policy tightening by central banks warrant some caution before positioning for further gold appreciation.
Investors might also prefer stay on the sidelines ahead of the latest figures on US consumer inflation, to be released on Tuesday. The crucial US CPI report will influence the Fed’s monetary policy outlook and dictate the near-term trajectory of the dollar. This, in turn, will help investors determine the next directional move for gold.
Meanwhile, XAU/USD is more likely to enter a consolidation phase amid a lack of market-relevant economic data releases. That said, US bond yields, dollar price dynamics coupled with broader risk sentiment could still provide some lift to gold and allow traders to take advantage of some short-term opportunities.
gold technical levels
Source: Fx Street
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