Gold Price Analysis: XAU/USD remains subdued in $1820s as traders look to subdued bond, FX markets

• XAU/USD is moving sideways in the $1820s, having been unreactive to the latest US Retail Sales report.
• Gold is taking its cue from subdued FX and bond markets ahead of further US data later in the session.

Given recent stabilisation in the US dollar and US bonds yields, it is no wonder that spot gold (XAU/USD) prices have continued to go sideways in the $1820s. At current levels around $1825, XAU/USD is trading with slightly in the green on the day, as traders now look ahead to further Fed speak and US data in the form of December Industrial Production and the January University of Michigan Sentiment survey. The latest December Retail Sales report, despite coming in significantly weaker than forecast, did not move FX, bond or gold markets much.

Gold traders will be looking to FX and bond markets for direction next week, as the debate rages on as to whether recent USD weakness will prove transitory and whether the run higher in US bond yields witnessed last week has further legs in the weeks ahead. If not, and if the dollar continues to ebb lower whilst long-term US bond yields ebb back into 2021 ranges, gold bulls will be looking for a break above recent highs in the $1830s area. Such a break could open the door to a run towards Q4 2021 highs in the $1870-80 area.

Conversely, should recent Fed hawkish plus the recent string of strong tier one US data releases translate into dollar dip-buying and a reinforced belief that the Fed will deliver on its pledge to eventually get rates back into the 2.5% area, sending long-term yields higher, gold’s fortunes could be much worse. The precious metal might in this case be looking at a swift dip back under $1800 and a test of recent lows in the $1780s.