Forex today's gold analysis accounts for 1920.

The dollar rallied to a multi-day high last week as inflation expectations fell to a five-week low based on 10- and five-year breakeven rates, according to the St Louis Fed.

On Tuesday (August 29), spot gold maintained a slight increase. As of press time, spot gold was reported at $1,921.67/ounce, an increase of 0.09%.

Spot gold prices held steady on Monday as investors digested hawkish comments from Federal Reserve Chairperson Jerome Powell as they awaited a slew of US economic data this week that would shed light on the outlook for inflation and the labour market.

FXTFrom a technical standpoint, gold prices remain between the 50-day exponential moving average (EMA) and the 200-day EMA, while struggling to retain buyers, especially in the face of bearish signals from the MACD indicator.

However, the firmer relative strength index (RSI) on the 14th, coupled with the continued trading of gold prices above $1,910/oz, has kept bulls hopeful. The 50-cycle EMA and a week-long uptrend line highlight the $1,910/oz level as a key short-term support.

Panchal said that it is worth noting that the confluence of the 200-cycle EMA and the 38.2% Fibonacci retracement of the late July-August downtrend (around $1,925/oz) limits short-term upside for gold prices.

After that, a horizontal area composed of multiple tops since the beginning of August (approaching $1,930/oz) will serve as the last line of defense for gold sellers.

On the downside, Panchal said that if the price of gold falls significantly below the $1,910/ounce support level, it may quickly pull the price of gold towards $1,900/ounce; if the price of gold falls below $1,900/ounce, then gold bears will look towards a monthly low around $1,884/ounce.

In terms of short-term trends, Panchal expects a limited increase in gold prices.

"Overall, gold prices are likely to continue in recovery mode, but the road to the upside appears to be long and bumpy," Panchal wrote.

US inflation expectations may be responsible for the market's recent aversion to the dollar, which hit a multi-day high last week.

Inflation expectations fell to a five-week low, according to 10- and five-year breakeven inflation rates, as shown by the St. Louis Fed.

The data show that five-year inflation expectations and 10-year inflation expectations are currently down to 2.21% and 2.30%, respectively.

Panchal said it is worth noting that Federal Reserve officials were unable to please the market with a major hawkish surprise, which could, along with the latest hints of weakness in U.S. inflation, weigh on Treasury yields and the dollar.

Gold climbed to around $1,920 an ounce in early Asian trading on Tuesday, cheered by a weaker dollar and US Treasury yields.

The weakness in Treasury yields and the dollar may be related to the lack of hawkish surprises among the Federal Reserve and other major central bankers at last week's Jackson Hole symposium.

In a major speech in Jackson Hole, Federal Reserve Chairperson Jerome Powell both signalled readiness to raise interest rates and played down the tendency to cut them. However, Powell also stressed his reliance on data, thus increasing the importance of upcoming statistics and amplifying uncertainty about the Fed's next move, which in turn led market participants to gold.

Markets were in a cautious mood ahead of Tuesday's release of the Conference Board Consumer Confidence Index for August, which would be the first challenge for gold buyers if bullish results are released.

The U.S. Conference Board Consumer Confidence Index for August is scheduled to be released at 22:00 Hong Kong time on Tuesday, with an expected reading of 116.2 and a previous value of 117.00.

Later this week, investors will primarily focus on the Federal Reserve's preferred inflation measure (i.e. the core U.S. PCE price index for July) and the August non-farm payrolls data.

The Fed's hawkish stance was tested for the first time last week when chairperson Jerome Powell signalled he was prepared to raise interest rates further in due course - with the auction of two-year Treasury bonds.

On Monday, August 28, US Eastern Time, the US Treasury announced that it completed the auction of two-year US Treasury bonds with a size of 45 billion US dollars. Although the results are not completely consistent, overall demand is strong, and the Federal Reserve's position has withstood the test this time.

The bid rate of this auction is 5.024%, which is the first auction rate since July 2006 to win the bidding rate of more than 5%, which is about 20 basis points higher than the previous auction rate of 4.823% in July, but still lower than the pre-issuance rate of 5.028%.

This is the third of the last four auctions without a so-called tail where the cut-off rate is higher than the pre-issue rate. This is a positive sign. Once there is a tail, the larger the tail, the lower the price the Treasury is forced to sell to bidders.

The comment said that the bid rate hit a new high since 2006, reflecting the trend of the US Treasury market sell-off intensified last week in an environment where investors expect the Federal Reserve to raise interest rates again this year. In early July, the yield of two-year US Treasury bonds in the secondary market hit the highest level since 2007, but the auction rate of two-year US bonds in late July fell, and the auction results did not reflect the peak interest rate in the secondary market.

CME's Federal Reserve observation tool shows that in the first session of this week, the US federal funds rate futures trading market expects that the probability of the next meeting of the Federal Reserve in September to keep interest rates unchanged is slightly more than 80%, and the probability of raising interest rates by at least 25 basis points in November is slightly more than 58%. A week ago, the probability was expected to be less than 43%.

In this auction, the value of investors' bids exceeded $108 billion, bringing the bidding multiple to 2.943 times, which is the second highest level since April 2020 after the auction of 2.944 times in January this year, far exceeding the previous multiple of 2.78 in July, and far exceeding the recent auction average of 2.71 times, reflecting strong demand.

The distribution of bids in this auction shows solid demand. Indirect buyers, including official institutions such as overseas central banks and private investors, were allocated 65.01%, lower than the previous auction share of 65.45%, but higher than the average of 63.03% in the last six auctions.

Direct purchasers, including the Federal Reserve and other U.S. federal government entities, received a 20.0% allocation, and primary dealers, who took both direct and indirect purchasers without absorbing some of the bonds and avoiding a failed auction, received a 14.98% allocation, a new high since May.

Overall, the auction of two-year U.S. Treasury bonds was neither excellent nor strong, boosting sentiment in the bond market.

After the auction results were released, the price of US Treasuries in the secondary market partially rebounded. The yield on the benchmark 10-year Treasury bond fell below 4.21% in early US trading, approaching the intraday low of 4.20% in the pre-market US stock market, away from the high since November 2007 that rose above 4.36% last Tuesday, and then rose again to 4.21%.

Interest rate-sensitive 2-year U.S. Treasury yields further declined, with U.S. stocks breaking 5.06% in midday trading, breaking away from the intraday high. On Monday, European stocks rose above 5.10% to refresh the high since July 6, approaching the high since mid-2007 set on July 6.