Gold Bugs Hold Sway Amid Negativity Aurora

As concerns over the highly contagious delta virus strain and weakening consumer sentiment in the United States stoked demand for haven assets, precious metals prices were relatively firm at the start of the week.

Consumer sentiment in the world’s largest economy slumped to its lowest levels in almost a decade in August after data Friday showed more Americans were worried about the economy’s prospects, inflation and the recent surge in cases of Covid-19.

Herd immunity is being challenged by new variants like delta and vaccine hesitancy in addition to shortages.

Following a clear breach above the $1,750 price band, the yellow metal built a strong support base above it, reinforcing the expectations of carrying on in the bullish trend, and waiting for $1,797 as the next main target.

By moving above the 50-day period Exponential Moving Average, the suggested positive scenario retains its positive outlook; however, breaking below $1,770 will halt the expected rise thus cause subsequent price declines towards $1,750 followed by $1,735 an ounce initially.

The likely trading range for today is between $1,760 support and $1,798 an ounce resistance.

A relatively weak dollar and lower Treasury yields have helped to give the precious metal a reprieve. However since Friday’s impressive Job report for July, the precious metal has declined in anticipation that the Fed would taper the monthly stimulus of $120 billion provided to the economy by the pandemic which has hit the world’s most powerful economy harder than expected.

Meanwhile, such hawkish conditions will put downward pressure on gold prices in the mid term.

Investors’ lack of interest in yellow metal is evident by its continued underperformance against the falling U.S Treasury yields.

The recovery from the lows has also been accompanied by large short positions, perhaps signifying profit-taking and short-covering.

For more insight into the likely timeline for tapering, investors will examine Jerome Powell’s speech as well as minutes from the Fed’s latest meeting. Retail sales for the United States are due on Tuesday.