The lower the gold falls, the faster the army of "bears" grows. And let the recovery of XAU/USD quotes after the flash accident that took place at the start of the week of August 13 be associated with the increase in the number of COVID-19 cases in the United States above 100,000 per day, which is the highest level since February. In fact, the deterioration of the epidemiological situation can play into the hands of such a safe haven asset like the US dollar.
As the precious metal moves downward, the list of reasons for the gloomy mood of its fans is constantly growing. Banks and investment companies are running from the bear camp on the USD index to the bull camp, and rumors of a breakdown in the long-term upward trend in US Treasury bonds are snowballing. They say that the global economy previously faced deflationary pressures due to the impact of globalization on international trade and the growing influence of technology companies on the economy. This allowed employers not to raise employee salaries.
Due to the pandemic and the associated recession, the situation has changed radically. The number of vacancies in the United States is at historic highs, as Americans are in no hurry to return to the workforce due to the accumulated safety cushion thanks to fiscal incentives. As a result, companies are forced to raise salaries for new employees, which allows us to speak of a long-term period of high inflation, contributing to the sale of US debt obligations and an increase in their profitability. The last factor is bearish for XAU/USD.
Dynamics of gold and US Treasury bond yields
Little consolation for gold comes from second-quarter ETF capital inflows in Europe in the amount of $1 billion, which is equivalent to 17.3 tons, according to the World Gold Council (WGC). Their American counterparts recorded an outflow of $402 million, or 7.3 tons. This dynamics of capital flows reflects the different views of Americans and Europeans on inflation and economic growth.
Dynamics of capital flows in gold ETFs
In my opinion, the fate of the US dollar is a more important driver of change in precious metal quotes. And here one should pay attention to the constant reduction in speculative positions on the US dollar since July 9, as well as to the growth in the number of "bullish" forecasts for the USD index. According to Bank of America, the reduction of the fiscal impulse and the normalization of the Fed's monetary policy will help correct stock indices and increase demand for the dollar as a safe-haven asset.
Standard Bank believes that amid divergence in economic growth, especially with countries like Australia and others imposing new restrictions due to COVID-19, the EUR/USD will fall to 1.15. Rabobank sees a continuation of its peak below 1.17 amid deteriorating global risk appetite due to the Delta variant.
Technically, gold's achievement of the target of 88.6% according to the Gartley pattern increases the risks of a pullback to 23.6% and 38.2% Fibonacci from the CD wave. At the same time, an increase to the resistance area at $1,765-$1,775 per ounce can be a great selling opportunity.
Gold, Daily chart
