Weekly Market Analysis / 11 - 15 October 2021

Sellers defend $1,800, all eyes on US T-bond yields

Gold started the week in a calm fashion and spent the first two trading days fluctuating in a tight range above $1,750. With the US Treasury bond yields falling sharply, however, gold gathered bullish momentum and gained nearly 2% on Wednesday before extending its rally to a fresh monthly high above $1,800 on Thursday. Ahead of the weekend, gold reversed its direction, once again, on rising US T-bond yields and erased the majority of its weekly gains to settle around $1,770.

  • $1,800 proves to be a tough resistance to crack for gold.

  • US Treasury bond yields continue to drive XAU/USD's action.

  • Chinese growth data and Markit Manufacturing PMIs stand out in next week's calendar.

What Happened Last Week

  1. The market action was subdued on Monday as the US bond markets were closed due to the Columbus Day holiday.

  2. On Tuesday, the benchmark 10-year US T-bond yield lost more than 3% and helped gold inch higher. On the other hand, the poor performance of US stocks allowed the greenback to outperform its rivals and limited gold upside.

  3. On Wednesday, US T-bond yields continued to push lower and the dollar came under heavy bearish pressure during the American trading hours. Additionally, upbeat third-quarter earnings from big US financial institutions made it difficult for the safe-haven greenback to find demand. Moreover, gold attracted additional technical buyers after piercing through the upper limit of its near-term trading channel at $1,770. 

  4. The data from the US showed on Thursday that the annual Producer Price Index (PPI) rose to 8.6% in September from 8.3% in August. Furthermore, the US Department of Labor announced that there were 293,000 initial claims for unemployment benefits in the US during the week ending October 9. On Thursday and gold reached $1,800 for the first time since mid-September.

  5. On Friday, the decisive rebound witnessed in the 10-year US T-bond yield on robust US data forced gold to turn south

News to Follow

  1. Third-quarter Gross Domestic Product (GDP) data from China will be looked upon for fresh impetus at the beginning of the week. Investors expect the Chinese economy to grow by 5.2% on a yearly basis after expanding by 7.9% in the second quarter.

  2. On Wednesday, Consumer Price Index (CPI) data from the UK and the euro area will highlight the economic calendar.

  3. In the meantime, investors will pay attention to the US Treasury bond yields. The benchmark 10-year US T-bond yield has managed to hold above the key 1.5% level despite the weekly decline and gold could come under bearish pressure in case the greenback capitalizes on rising yields.

Short-Term Outlook

  • The initial hurdle is located at $1,780 ahead of $1,820.

  • Below $1,770 could open the door for additional losses toward $1,760 below $1,750.