Gold Price Forecast: XAU/USD idles daily make or break zone

Gold is sitting at a critical area of support in the open.

Gold is starting off the day flat and where it left off from Friday at around $1,810.

The gold price on Friday ended down 0.94%, falling from a high of $1,832.06 to a low of $1,809.03 while the US dollar eked out a slight gain following an upbeat Retail Sales report.

The dollar index DXY, which measures the greenback against a basket of six currencies, was ending 0.16% higher at 92.712. The index is up 0.6% for the week.

US Retail Sales unexpectedly rose in June as demand for goods remained strong.

Solid data and a shift in interest rate expectations after the Federal Reserve flagged in June sooner-than-expected hikes in 2023 have contributed to the strength in the greenback in recent weeks. 

Investors, for now, are seeking carry and considering that gold does not hold a similar carry advantage, speculative flows into precious metals have remained subdued.

Gold's persistent weakening against real yields could see the complex weaken before the pricing for Fed hikes supports higher prices.

That being said, the carry-fx space is not seeing much love. 

The recent increase of concerns over the spread of the delta variant is hurting risk appetite which could fall into the hands of both the price of gold and the US dollar. 

• COVID spread weighing on market's risk appetite

Gold positioning

''Money managers only marginally increased their gold length, despite sinking real yields in the US'', analysts at TD Securities explained.

''Indeed, gold prices are still struggling to firm, in spite of the extremely positive price action in real yields which sent US10y TIPS prices back towards their pandemic-era highs,'' the analysts added.

''In contrast, the yellow metal can't manage to break north of its 200dma. This highlights a sharp divergence in capital flows as high inflation prints have kept breakevens elevated, primarily as a function of carry.''

Gold technical analysis

Technically, gold's breakout from its recent trading range may be attracting some interest from technicians, but it has recently taken a turn for the worst:

 However, only a break below the 1,800 thresholds would likely upset the bulls.