Gold Price Analysis: XAU/USD refreshes 14-week top around $1,850 on upbeat sentiment

• Gold takes the bid after two consecutive weekly run-ups.

• Risk-on mood favors gold buyers amid downbeat US dollar, Treasury yields.

• Sluggish US data cools down inflation concerns, helps Fed to defend easy money policies.

• Geopolitical, covid headlines can offer intermediate moves but nothing major to keep a tab on.

Gold bulls keep the reins around $1,848 as traders extend Fridays risk-on sentiment amid the early Monday morning in Asia. Although recent headlines from China and the United Nations (UN) test the market optimism, receding fears of reflation back the gold buyers amid a quiet start to the key week.

Feds dilemma seems priced in…

As the economies in the West rebound, inflation concerns jump back to the table as central banks and governments around the globe have pumped the system with money during the pandemic. The US Federal Reserve (Fed) has a more challenging task to defend the easy money policy after the Bank of Canada (BOC) and Bank of England (BOE) altered their bond purchases and renewed tapering talks. Also on the negative side could be expectations of further stimulus from US President Joe Bidens table.

Even so, the market players seem to have already prepared for the Feds play down as the US dollar index (DXY) has been on a back foot since late March, which in turn backs the gold prices.

The greenback gauge got another jab on Friday when the US Retail Sales and Michigan Consumer Sentiment Index figures, for April and May respectively, slipped below forecast, easing the way for the Fed policymakers seeking “multiple data” to confirm the policy adjustments.

The upbeat sentiment ignored the geopolitical tussles between Israel and Palestine that recently pushed the United Nations (UN) for an emergency meeting. However, nothing important came out of the meeting, due to the US as per China. Also challenging the mood could be the headlines suggesting that Chinas ban on Aussie coal import could extend into 2022.

While the S&P 500 Futures look for more push towards the north, eyeing China data dump for April, gold buyers remain hopeful as recent data from the US favor the Fed.

Against this backdrop, the Australia and New Zealand Banking Group (ANZ) said, “Whilst we give weight to re-opening and noise arguments, the evolution of core services inflation merits very close monitoring, as it makes up 60% of the US CPI. Long-term inflation expectations are also moving up, as shown in the consumer survey this week. And central banks are also increasingly concerned about frothy asset prices, as evidenced by the April ECB minutes last week. We have recently seen both the BoE and BoC start to gently dial back weekly bond purchases. Inevitably, policymakers are increasingly debating the merits versus risks of monetary policy ‘super-max’.”

Looking forward, China‘s April month data dump could help the gold prices extend recent upside, should the figures cross downbeat forecasts. However, gold’s major upside may await the Fedspeak scheduled during the US session.

Technical analysis

Gold battles 200-day SMA for the first time since early February amid stronger oscillators than those dragged the quote back in the last attempt. Also favoring the gold bulls could be near-term support lines as well as the risk-on mood.

However, a clear break above the immediate $1,846-47 hurdle, comprising the key SMA, becomes necessary for the bulls before targeting the late January tops surrounding $1,875.

During the run-up, February 10 swing high near $1,855, the previous attempt to cross the 200-day SMA, could act as an intermediate halt.

Meanwhile, a two-week-old support line near $1,820 can keep the gold sellers away amid a fresh pullback, if any.

Also acting as a downside filter is an upward sloping trend line from March 31, around the $1,800 threshold.

Gold daily chart