Higher In Asia As Dollar Softens

Gold sits $6/oz firmer to print $1,726/oz, operating a little below session highs at typing. The precious metal has caught a bid amidst a limited downtick in the USD (DXY), remaining some distance away from Monday’s peak ($1,736.3/oz).

• To recap, gold closed ~$8/oz weaker on Monday, softening as an uptick in U.S. real yields countered a marginal decline in the DXY. The move lower unwound all of the previous session’s gains, keeping gold a short distance away from multi-month lows, with the proximity to the upcoming FOMC decision perhaps sapping conviction for a sustained move in either direction, keeping in mind price movements prior to the meeting.
• To elaborate, gold has shed ~$80 so far this month (on track for a fourth consecutive lower monthly close), with the move lower coming as OIS markets have pointed to rising expectations for Fed tightening over the same period (~82bp of tightening for the Jul FOMC at typing vs. ~69bp at the beginning of July).
• From a technical perspective, short-term gains in gold appear to be corrective, following its bounce off $1,681.0/oz last Thursday, with a break above resistance at $1,745.4/oz (Jul 13 high) having the potential to strengthen a bullish set-up (and scope for a further corrective bounce). On the other hand, initial support is seen at $1,697.7 (Jul 14 low).