Paring Friday’s Gains

Gold deals $6/oz softer at writing to print $1,669/oz, edging lower after failing to break above Friday’s best levels earlier in the session.

• To recap, gold rose from 29-month lows (at $1,654.2) on Friday to close $10 firmer, hitting session highs on the release of preliminary UoM data, with the rebound aided by a pullback in the USD (DXY) after a brief break above the 110.00 mark.
• To elaborate on the former, gold likely drew some support from the slight miss in 5- to 10-Year inflation expectations (+2.8% vs BBG median +2.9%) and as-expected decline in 1-Year inflation expectations (+4.6%), even as the sentiment survey disappointed (59.5 vs. BBG median 60.0).
• Looking ahead, the FOMC decision on Wed remains the key risk event, with the size of the rate hike in focus. Sep FOMC dated OIS now price in ~80bp of tightening, pointing to ~20% odds of a 100bp move at that meeting.
• From a technical perspective, conditions remain bearish following the breach of its bear trigger at $1,681.0 last Thursday. Initial support is seen at $1,654.2 (Sep 16 low), with a breach of that level potentially exposing further support at $1,640.9 (Aug 8 ‘20 low).