Gold Price Analysis: XAU/USD subdued in $1820 in this US holiday trade, eyeing potential dollar recovery

• Gold is subdued in the $1820 area in quite trade with US markets shit for the day.
• Amid a lack of tier one US data, XAU/USD will be looking to FX and bond markets for impetus this week.

It’s been a subdued session thus far for spot gold (XAU/USD) and this is overwhelmingly likely to remain the case for the rest of the day given the closure of US markets for Martin Luthar King Jr Day holidays. US bond markets are shut for the day and FX markets are not trading with much conviction, with the DXY broadly flat on the day in the low 95.00s, thus not giving gold much impetus by way of inter-asset class correlations.

There was some attention on US 10-year bond futures, the implied yield of which hit 1.86% earlier in the day, which some saw as a reflection of hawkish Fed bets ahead of next week’s meeting and in wake of the recent run of hawkish rhetoric from policymakers last week. But this seems not to have had an impact on gold, with traders opting not to read too much into moves in the futures markets plagued by a lack of liquidity this Monday.

XAU/USD is currently trading close to the $1820 level, meaning the precious metal remains nicely contained within the $1812-$1828ish ranges of the past few sessions. It’s a quieter week as far as US economic events is concerned, with no Fed speakers appearing given the central bank has entered blackout ahead of its January 25-26 meeting. Regional Fed manufacturing surveys for January and housing data will attract the most attention but are unlikely to do much to shift the overarching macro-narratives, such as the expectation that the Fed will kick off rate hikes in March.

That suggests gold traders will need to look to FX and bond markets for direction. If the overarching expectation of many strategists is that the dollar could see near-term strength as it recovers from its recent stumble on the expectation of Fed policy tightening, then that suggests gold’s bullish prospects are limited. That means recent highs in the $1830 area may continue to limit XAU/USD upside and a retest of key moving averages in the $1800-$1810 area is on the cards this week.