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Gold continued its modest intraday gains in the early European session and was most recently hovering around the $1,740 region. A modest pullback in US Treasury bond yields has kept dollar bulls on the defensive and is giving the low-yielding yellow metal some support, according to market analyst Anil Panchal. However, the analyst states that a strong recovery in global stock markets could act as a headwind for the safe-haven gold.

There is a cautious mood in the market before important events

Analyst Anil Panchal warns that expectations for an early policy tightening by the Fed could further cooperate to limit the rise of gold. Meanwhile, it’s worth remembering that the Fed has hinted that it will start rolling back its major pandemic-era stimulus in November. In addition, the dot chart points to the policy makers’ trend to increase rates in 2022. This makes it prudent to wait for a continuation of strong buying before confirming gold has bottomed out in the near term and positioning for any meaningful appreciation move.

Gold rallied 0.57% on the day to $1,744, while retaining the early-August recovery. The yellow metal fell to its lowest level the previous day as the US Dollar Index (DXY) tracks stronger Treasury yields. However, amid mixed signals, market consolidation joins a cautious mood ahead of major events to bolster the recent volatility in the commodity.

Global developments and their possible effects on gold price

While analyst Anil Panchal has copied Fed Chairman Jerome Powell’s tunes from Louis Federal Reserve Chairman James Bullard to repeat the fading song, fears over U.S. President Joe Biden’s ability to persuade Republicans to extend the debt limit have fueled dollar buyers lately. He says he’s worried. On the other hand, there is optimism in the markets that China has waived Intellectual Property (IP) for the covid vaccine and the US is recovering relative to China.

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As we reported , recently, global rating agency Fitch has been tracking the global phenomenon and downgraded Dragon Nation’s credit rating from CC to C. Another negative issue for Chinese investors is the Reuters report that the Japan State Pension Investment Fund (GPIF) will not invest in Yuan-denominated Chinese government bonds due to settlement and liquidity problems. In addition, the doubts regarding Evergrande’s coupon payment and the lack of data/events in China should not be forgotten, and the US pressure to cut oil imports from Iran to China. According to Anil Panchal, this is confusing gold traders and helping them consolidate recent losses.

However, S&P 500 Futures rose 0.65% on the day to stop the two-day decline, while US 10-year Treasury yields hit mid-June highs after rising for five consecutive days. Also, DXY remained around the 10-month high, while dollar investors were looking for new clues to break the monotony. Going forward, the analyst will attend the headlines of the planned speeches of the Fed and ECB policy makers regarding the US debt limit and China’s Evergrande to delight gold traders.

Gold technical analysis: remains under pressure towards year low

Market analyst Anil Panchal states that gold is trying to recover between the lackluster MACD and RSI lines, indicating further weakness to retest the two-week descending support line around $1,727.

However, the RSI line could test the oversold zone at the time and limit additional downside. A breach of this could push the price towards the $1,700 threshold before emphasizing the annual low surrounding $1,687.

Recovery moves must clear the immediate trendline hurdle near $1,745 before gold can lead buyers to a descending resistance line around $1,771 from Sept. Anil Panchal points to the following levels in his analysis:

Even if the price manages to break past the $1,771 resistance line, a horizontal area near $1,782 and $1,788 from Sep 08 and the 200-SMA, respectively, will challenge gold’s rise. Overall, gold remains under pressure towards the lowest level of the year, but mid-range bounces cannot be ruled out.

gold price 4 hourdollarsic chart

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Michael Lewis

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