Weekly Market Analysis / 20 - 24 September 2021

Gold closed the third straight week in the negative territory and remains vulnerable amid hawkish Fed outlook

Following the previous week’s decline, gold staged a rebound and closed in the positive territory on Monday and Tuesday. After reaching its strongest level since last Thursday’s sharp decline at $1,787 on Wednesday, however, the XAU/USD pair lost its traction as the greenback gathered strength on the back of the hawkish FOMC policy outlook. Rising US Treasury bond yields caused the bearish pressure to increase in the second half of the week and the pair slumped to a multi-week low of $1,7137 on Thursday before staging a technical rebound and closing near $1,750 on Friday.

  • XAU/USD closed the third straight week in the negative territory.

  • Hawkish FOMC policy outlook, rising US T-bond yields weighed on gold.

  • XAU/USD seems to have formed technical support at $1,740 ahead of $1,730.

What Happened Last Week

  1. At the start of the week, concerns over the Evergrande crisis turning into a global turmoil caused market participants to seek refuge in safe-haven assets. Although the USD outperformed its risk-sensitive rivals, gold didn’t have a difficult time finding demand either.

  2. In the absence of high-impact data releases, markets remained relatively calm on Tuesday and investors stayed on the sidelines

  3. On Thursday, the impressive upsurge witnessed in US Treasury bond yields weighed heavily on gold and XAU/USD extended its slide to a fresh 5-week low of $1,737.84. In the meantime, the US Department of Labor’s weekly publication showed that the Initial Jobless Claims rose to 351,000 from 335,000. On the last trading day of the week, gold made a technical correction toward $1,750.

News to Follow

  1. On Monday, August Durable Goods Orders will be featured in the US economic docket but this data by itself is unlikely to trigger a significant market reaction.

  2. On Tuesday, the Conference Board will release the Consumer Confidence data for September.

  3. On Thursday, the US Bureau of Economic Analysis will publish the final estimate of the second-quarter Gross Domestic Product (GDP) growth alongside the US Department of Labor's weekly Initial Jobless Claims report.

  4. The Core Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred gauge of inflation, will be looked upon for fresh impetus on Friday ahead of the ISM Manufacturing PMI and the UoM's Consumer Sentiment Index data.

  5. Meanwhile, investors will keep a close eye on the US T-bond yields' movements and the general risk sentiment. 1.5% aligns as key resistance for the benchmark 10-year US T-bond yield and a break above that level could trigger a rally and pave the way for another leg lower in gold prices.

Short-Term Outlook

  • The initial hurdle is located at $1,768 ahead of $1,784.

  • Below $1,750 could open the door for additional losses toward $1,730 below $1,720.