Gold Price Analysis: XAU/USD steadies around $1790 as key US data eyed

• Spot gold is subdued close to $1790 ahead of the release of US ISM Manufacturing PMI.
• XAU/USD may remain subdued ahead of key events later in the week including the FOMC meeting and US NFP.  

A rally in the US dollar last Friday that saw the Dollar Index (DXY) surge from the low 93.00s back to the north of the 94.00 took the wind out of spot gold (XAU/USD)’s sail at the end of last week, pushing the precious metal back to the south of its 200-day moving average (DMA) at $1792/oz and even briefly below both its 50 and 21DMAs at just above $1780 and $1777 respectively. But XAU/USD (+0.3% this morning) has regained some composure at the start of the new week and month and is currently trading just under the $1790 level, more than $15 (or nearly 1.0%) above last week’s lows.

That’s mostly down to the fact that the DXY has eased back from overnight highs around 94.30 and is at risk of breaking below the 94.00 level again ahead of the release of the much anticipated ISM Manufacturing PMI report at 1400GMT. Note that the time difference between the London and New York is currently four hours (rather than the usual five), given that the UK reverted back from daylight saving time over the weekend and the US does not until this weekend, hence why the ISM data is being released one hour earlier than usual in UK time. In terms of what to expect; consensus expectations are for the headline ISM Manufacturing PMI index number to come in at 60.5, a light moderation from September’s 61.1, indicating that growth in the sector remains robust in early Q4. Market participants will be on the lookout for fresh evidence as to the impact of ongoing supply chain disruptions and bottlenecks on US industry, however.

If weaker than expected data was enough to push the DXY back below the 94.00 level, this would likely help propel spot gold prices back towards the $1800 level and perhaps back above its 200DMA. The fact that weaker than expected US ISM data might also weigh on US real yields (which have already been subdued in recent weeks with the 10-year TIPS yield around -1.0%) would be of further help to the precious metal – remember that non-yielding gold has an inverse correlation to real yields, with rising real yields increasing the opportunity cost of holding gold and thus reducing its appeal.

Most likely, if the data is close to expectations, the broader market reaction is likely to be subdued. A host of further key central bank and economic data releases await later in the week, many of which overshadow today’s ISM manufacturing survey release, including monetary policy decisions from the Fed (Wednesday), BoE (Thursday), and RBA (Tuesday), and US NFP (Friday). These are likely to be the key drivers of gold this week; a dovish Fed outcome and weaker US jobs and ISM data could see XAU/USD testing resistance around $1810, while a hawkish outcome and strong data could see XAU/USD drop towards support around $1750.