Weekly Market Analysis / 16 - 20 August 2021

Despite the broad-based USD strength, gold managed to stay resilient throughout the week with the risk-averse market environment allowing the precious metal to find demand. After edging higher toward $1,800 during the first half of the week, the XAU/USD pair edged lower on Thursday and ended up closing the week virtually unchanged a little above $1,780.

“Physical demand is recovering in China as well as India, with spot premium turning positive for both countries. China imports are picking up this year following a significant drop last year.”

What Happened Last Week

The disappointing data from China, which showed that Retail Sales and Industrial Production expanded at a softer pace than expected in July, weighed on market sentiment at the start of the week.
On Tuesday, the US Census Bureau reported that Retail Sales declined by 1.1% on a monthly basis in July to $617.7 billion. On a positive note, the Federal Reserve’s monthly publication showed that Industrial Production rose by 0.9%, compared to analysts’ estimate of 0.4%, but this reading failed to help the sentiment improve.
On Wednesday, the FOMC’s minutes of its July policy meeting revealed some policymakers saw it appropriate to start preparing for asset tapering soon.
The US Department of Labor announced on Thursday that the Initial Jobless Claims fell to the lowest level since March 2020 at 348,000.
In the absence of high-tier data releases on Friday, the DXY staged a correction to mid-93s but rose more than 1% for the week.

News to Follow

IHS Markit will release the preliminary August Manufacturing and Services PMI reports for Germany, the euro area and the US on Monday. Investors expect the economic activity in the US manufacturing and service sectors to continue to expand at a robust pace but they will be paying close attention to underlying details on input price pressures. In case those reports confirm that inflation will remain high for longer than expected, the USD could preserve its firm footing.
On Wednesday, July Durable Goods Orders data from the US will be looked upon for fresh impetus ahead of Thursday’s weekly Initial Jobless Claims report. Additionally, the US Bureau of Economic Analysis will release its second estimate of the second-quarter GDP growth, which is unlikely to receive a noticeable market reaction.
Finally, the Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred gauge of inflation, will be featured in the US economic docket. On a yearly basis, the Core PCE Price Index, which excludes volatile food and energy prices, is forecast to inch higher to 3.6% in July from 3.5% in June. More importantly, FOMC Chairman Jerome Powell will deliver his prepared speech at the Jackson Hole Symposium at 1400 GMT, suggesting that the market reaction to the PCE inflation report is likely to remain short-lived.

Short-Term Outlook

Gold still needs to break above $1,783, It is followed by $1,792, the upside target for gold bulls is $1,805, Looking down, some support awaits at $1,775, It is followed by $1,766.