Happy Friday fellas,

Gold succeeded in stopping its downward rally of the previous day, drawing some fresh modest bids around the $1,785 level, as COVID-19 continues to spread. The virulent Delta variant of the virus continues to favor safe-haven assets, like GOLD. Meanwhile, the frightful circumstances in Afghanistan, due to the insurgence of the Taliban, has put an added burden on the market trading mood, thus leading to further gains in the safe-haven commodity, gold.

The prevalent uncertainty caused by rising numbers of COVID-19 cases globally, and the relentless spread of the Delta variant, are seen as critical factors that are supporting gold prices. On the contrary, the strength of the broad-based US dollar, backed by the downbeat market sentiment and the fourth straight weekly drop in jobless claims, is capping the upside for the yellow metal, due to the negative correlation between the USD and gold.

In the same line, the increasing optimism with regard to COVID vaccinations and the willingness of the Western leaders to help the struggling Asia-Pacific nations, is challenging the risk-off market mood, which could be seen as a negative factor for gold. Currently, the gold price is trading at 1,784.85, and consolidating in the range between 1,778.83 and 1,786.65.

Risk-Aversion & COVID Delta Variant Fears

Despite the optimism over the willingness of western leaders to aid Asia-Pacific nations in their battle against the virus, the market trading sentiment failed to stop the bearish performance seen during early-day trading. It remained well offered during the second half of the Asian session on Friday, as the market trading sentiment was under pressure due to coronavirus woes.

After hitting a record in daily infections, with 758 new cases the previous day, new infections in Australian for Thursday decreased to around 700. In contrast, the number of cases in New Zealand are picking up pace outside Auckland, with Wellington recording two new infections on the day. 

Meanwhile, the UK has reported the highest death toll in several days, and the numbers in the US are also going up. As a result, the S&P 500 futures has dropped by 0.22% to 4,393, while the US 10-year Treasury yields has dropped by 2 basis points (bps) to 1.24%. 

On the other hand, the escalating tension over the Taliban invasion of Kabul, Afghanistan, has had a further bearish impact on the global equity market. However, the negative appearance of US stock futures tends to highlight the risk-off sentiment, which should support the gold prices.

US Dollar Keeping Gold Under Pressure

The US Dollar Index (DXY) hit a yearly high on the back of the downbeat market sentiment and the fourth straight weekly drop in jobless claims, to pre-pandemic lows. Apart from this, the uptick in the US dollar was further bolstered by the fears that the Delta variant of the coronavirus could delay global economic recovery. 

Furthermore, the dollar got some additional lift from expectations that the Federal Reserve will start to taper stimulus this year, even with COVID-19 infections surging in the US this month. Thus, the bullish bias of the US dollar has capped the upside momentum for the precious metal. 

Moving on, market traders will keep their eyes on the Jackson Hole meeting of central bankers on Aug. 26-28 for further clues as to the direction the Fed is likely to take. Apart from this, the US dollar may benefit from the safe-haven demand and keep weighing on commodities, amid a light calendar.

Gold – XAU/USD – Technical Outlook – Upward Trendline to Support at $1,782

Gold is trading slightly higher on Friday, with a bullish bias, above the pivot point support mark of 1,782. It faces immediate resistance at 1,795; a bullish breakout over this level could initially expose prices to levels of 1,802 and 1,809. If the buying trend continues, GOLD prices might see the 1,832 mark.

Daily Support and Resistance

S3 1,749.2

S2 1,766.02

S1 1,773.12

Pivot Point: 1,782.83

R1 1,789.93

R2 1,799.65

R3 1,816.46