- Gold remains relatively quiet after Monday’s sharp decline.
- XAU / USD could make a technical correction before the next leg down.
- A daily close above $ 1,760 could put gold in a consolidation phase.
Following the sell-off on Friday, gold suffered heavy losses at the beginning of the week and lost more than 4% in a two-day slide. Even if XAU/USD managed to erase a portion of his daily losses in the second half of the day on Monday, he is having a hard time extending his recovery. At time of writing, the pair was virtually unchanged on the day at $ 1,730.
The relentless strength of the US dollar following aggressive comments from the Fed and the release of upbeat data continue to force gold to remain on the defensive.
On Monday, Richmond Fed Chairman Thomas Barking noted that the Fed has made additional substantial progress toward the taper benchmark. Similarly, Atlanta Fed Chairman Raphael Bostic added that he could see the Fed cutting back on purchases between October and December. Meanwhile, the monthly report released by the US Bureau of Labor Statistics revealed that the number of job vacancies on the last business day of June reached a new high of 10.1 million.
Reflecting the strong performance of the dollar against its rivals, the US dollar index remains afloat at its highest level in almost three weeks above 93.00.
Later in the session, Non-Farm Productivity and Unit Labor Costs data for the second quarter will be included on the US economic agenda. Additionally, investors are looking for new clues on when to downsize when the president of Cleveland Fed Loretta Mester and Chicago Fed Chairman Charles Evans speak at 14:00 GMT and 18:30 GMT, respectively.
More importantly, July US Consumer Price Index (CPI) data will be watched closely by market participants on Friday. Commenting on recent gold action, “the gold market would remain sensitive to inflation-driven data and US downside talk, so watch out for US July CPI data. Tomorrow’s US, “said Benjamin Wong, strategist at DBS Bank.
Gold technical outlook
Key technical levels remain intact on Tuesday as gold fluctuates in a relatively tight range. Meanwhile, the Relative Strength Index (RSI) on the daily chart remains below 30, suggesting that XAU / USD could look to correct its oversold conditions before pressing lower. The previous support level at $ 1,750 now lines up as the initial resistance before $ 1,760 (static level). A daily close above the latter could help the XAU / USD enter a consolidation phase in the short term.
On the other hand, $ 1,730 (static level) is the first downside target should XAU / USD come under renewed downward pressure. $ 1,700 (psychological level) lines up as the next key support ahead of $ 1,687 (Aug 9 low).
Technical levels
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