Weekly Market Analysis / 5 - 9 July 2021

Gold price has finally managed to break the ongoing range play around the $1800 mark, having caught a fresh bid on the London fix and Fed’s semi-annual Monetary Policy Report. The Fed report highlighted that the upside risks to the inflation outlook in the near term have increased. Among other factors at play, nothing seems to have changed in the American session, as the risk-on mood prevails, keeping the Treasury yields uplifted while downing the US dollar.

Gold price rallied as Gold price fails to find a clear directional bias amid mixed clues, as risk-on flows return to markets and lift the Treasury yields, exerting downside pressure on the metal. The Fed’s tapering expectations also push the gold bulls on the sidelines.

Meanwhile, the positive market mood dents the US dollar’s safe-haven appeal, helping keep a floor under gold price. The downside also remains cushioned, as the underlying theme of concerns over slowing global economic recovery remains intact. Investors remain unnerved about the economic rebound, in light of the spread of the highly contagious Delta covid variant.

Next week in gold: Inflation in focus

Has US inflation accelerated? That is the main question for broad markets and gold. If the Core Consumer Price Index (Core CPI) rose in June above 4%, it could push the Federal Reserve to tighten its policy sooner rather than later, beginning by printing fewer dollars. A taper of the bank's bond-buying scheme could put pressure on gold.

On the other hand, inflation may have peaked last month – perhaps due to diminishing base effects, the sharp fall in prices seen in the spring of 2020. In that case, the Fed would feel comfortable purchasing $120 billion in bonds for longer. Some of that money could make its way to the precious metal.

Other events to keep an eye on are Chinese growth figures for the second quarter and US retail sales statistics for June. China is the world's second-largest economy, and the US is No. 1 – with the latter's economy heavily dependent on production in the former. In general, better figures from both sides of the Pacific could cheer investors, supporting gold prices. Disappointing data could weigh on XAU/USD.

Gold Price: Key levels to watch

The gold price is facing stiff resistance at $1810, $1813, $1819 and $1821 will be next on the buyers’ radars.

Alternatively, immediate support is seen at $1798, $1796 and defense for gold bulls is aligned at $1791.