Key Talking Points:
- Fed speakers in focus as investors weigh taper announcement in November
- XAU/USD rejected at 50% Fibonacci as yields pick up
Gold (XAU/USD) is struggling to extend the bounce from Friday as risk sentiment holds a positive tone into the new week. The Evergrande situation seems to be moving out of sight after China’s liquidity injections, but US yields are picking up again after jumping to a two-month high last Thursday post-FOMC meeting. There is a large number of Fed speeches this week, with Evans, Williams, and Brainard scheduled for today, and investors are likely to be looking for further guidance after last week’s taper signals.
The upcoming packed calendar of central bank speeches is probably keeping fresh buying attempts from coming in as anticipation builds on what tone Fed members will have. The taper signal on Wednesday’s FOMC could either be extended or played down as Powell was careful not to back himself into a corner, so I would expect traders to be paying attention to start gauging the likelihood of it happening at the November meeting.
The schedule for Fed speakers over the next two days is the following:
Charles Evans (13:00 BST) – Dovish (2021 voter)
John Williams (17:00 BST) – Dovish (2021 voter)
Lael Brainard (17:50 BST) – Dovish (2021 voter)
Charles Evans (14:00 BST) – Dovish (2021 voter)
Jerome Powell (15:00 BST) – Dovish (2021 voter)
Michelle Bowman (18:40 BST) – Neutral (2021 voter)
Raphael Bostic (20:00 BST) – Hawkish (2021 voter)
The speakers scheduled for today are on the most dovish side so I would expect there to be some caution in their speeches, not wanting to give too much away about a November taper timeline despite it being widely expected. A little more insight may come on Tuesday as Michelle Bowman may be the first member to give insight into what those members who are on the fence are feeling about current conditions and market risks. A weaker than expected message about reducing stimulus in the coming months is likely to weigh on yields, giving gold an artificial bounce.
XAU/USD Daily chart
Chart prepared by Daniela on Refinitiv
XAU/USD was attempting to push above its 50% Fibonacci (1,761) this morning as yields were coming off slightly, but conditions have reversed and the US 10 year yield has shot up again to a three-month high at 1.4819, causing the Dollar to pick up slightly and pushing gold back down to 1,750. The tough area for bulls to crack in the short term will be the 50% Fib, followed by the upper bound (1,764) of a common confluence area. The mid to long-term outlook is bearish for gold as the Fed gets closer and closer to tightening so I would expect XAU/USD to struggle to hold above 1,800 over the coming weeks but we may see a short-term bounce towards the 61.8% Fibonacci (1,834) if riskier assets are rejected again, causing a move towards safer US treasuries, giving gold a boost as yields come off.
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— Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin