Weekly Market Analysis / 9 - 13 August 2021

Following the sharp decline witnessed on Friday, August 6, on the impressive July jobs report from the US, the XAU/USD pair started the new week on the back foot and plunged to its weakest level since late March at $1,687. Nevertheless, gold managed to erase a large portion of its losses in the second half of the day on Monday and settled near $1,730 before staging a rebound in the remainder of the week. After rising more than 1% on Wednesday, XAU/USD stayed calm on Thursday and continued to push higher on Friday and ended up closing the week in the positive territory above $1,778.

What Happened Last Week

The unabated USD strength at the start of the week caused XAU/USD to extend its slide. Supported by rising US Treasury bond yields, upbeat data and hawkish Fed commentary, the US Dollar Index (DXY) continued to rise toward 93.00.

  1. Monday, JOLTS Job Openings advanced to a series high of 10.1 million in June. Furthermore, Atlanta Federal Reserve Bank President Raphael Bostic said that the Fed could start to reduce asset purchases between October and December.

  2. On Wednesday, the greenback came under modest selling pressure after the July inflation report and opened the door for a gold rebound. The Core Consumer Price Index (CPI), which excludes volatile food and energy prices, declined to 4.3% on a yearly basis in July from 4.5% in June. 

  3. On Thursday, gold fluctuated in a relatively tight range around $1,750 as the US data failed to trigger a noticeable market reaction. The US Department of Labor reported that Initial Jobless Claims declined by 12,000 to 375,000 in the week ending August 7 and the US Bureau of Labor Statistics announced that the annual Producer Price Index (PPI) for final demand jumped 7.8% from 7.3%.

  4. On Friday, the USD selloff ahead of the weekend helped XAU/USD build on its recovery gains.

News to Follow

  1. Tuesday, the July Retail Sales report from the US will be the first high-tier data release of the week. Investors expect sales to contract by 0.2% on a monthly basis in July following June’s expansion of 0.6%.

  2. On Wednesday, July CPI data will be featured in the European economic docket and a significant reaction in the EUR/USD pair could impact the USD’s market valuation. Later in the day, the FOMC will release the minutes of its July meeting. 

  3. Later in the week, the weekly Initial Jobless Claims report will be the last data release of the week from the US.

Short-Term Outlook

Gold is widely expected to move sideways in the near term with an average price target of $1,772 in the one-week view. On the downside, the initial resistance is located at $1,760 (static level). Below that level, the next target could be seen at $1,750. Resistances on the other hand, are located at $1,800, $1,805 and $1,820.