Gold Price Attracts Some Sellers On Hawkish Fed-inspired USD Strength

Gold price (XAU/USD) meets with a fresh supply during the early European trading hours and erodes a part of Friday's positive move in the wake of the Federal Reserve's (Fed) hawkish surprise. In fact, policymakers lowered their forecast for the number of rate cuts this year to one from three projected in March. This remains supportive of elevated US Treasury bond yields, which allows the US Dollar (USD) to stand tall near its highest level since early May touched on Friday and is seen as a key factor driving flows away from the non-yielding yellow metal.

That said, the possibility of two Fed rate cuts in 2024 remains on the table amid signs of easing inflationary pressure in the US. This, in turn, is holding back the USD bulls from placing aggressive bets and lending some support to the Gold price. Apart from this, persistent geopolitical tensions in the Middle East, along with political uncertainty in Europe, should help limit losses for the safe-haven metal. Hence, it will be prudent to wait for some follow-through selling before positioning for the resumption of the XAU/USD's pullback from the all-time peak touched in May. 

 

Daily Digest Market Movers: Gold price bulls remain on the defensive amid Fed rate jitters, downside seems limited

  • The Federal Reserve adopted a more hawkish stance at the end of the June policy meeting, which continues to act as a tailwind for the US Dollar and is seen undermining the non-yielding Gold price. 
  • That said, weaker US consumer and producer prices data released last week indicated that inflation is subsiding, which keeps hopes alive for two Fed rate cuts in 2024, in September and in December. 
  • Adding to this, the Labor Department reported on Friday that US import prices unexpectedly declined for the first time in five months in May, providing another boost to the domestic inflation outlook.
  • Furthermore, the University of Michigan survey showed that consumer sentiment touched its lowest level in seven months in June and the index fell to 65.6 from 69.1 in May, missing consensus estimates. 
  • Cleveland Federal President Loretta Mester said on Friday that we are starting to see inflation move down again after stalling and that it is important not to wait too long to start cutting interest rates.
  • Mester, in an interview with CNBC, added that she would like to see a longer run of good-looking inflation data and that the path towards the Fed's 2.0% inflation goal may take longer than expected.
  • Chicago Fed President Austan Goolsbee noted that he still wants to see further progress on inflation and that if inflation behaves as it did in the first quarter, we will have a hard time cutting rates.
  • Minneapolis Fed President Neel Kashkari said on Sunday that we need to see more evidence to convince inflation is heading to 2% and that the central bank will wait until December to cut rates.
  • This raises doubts about the Fed's rate-cut path, which might cap any meaningful appreciating move for the buck and lend some support to the XAU/USD amid geopolitical risks and political uncertainty. 

 

Technical Analysis: Gold price could accelerate the downfall once the $2,300 mark is broken decisively

From a technical perspective, traders need to wait for a sustained break and acceptance below the $2,300 mark before placing fresh bearish bets around the Gold price. Hence, it will be prudent to wait for some follow-through selling below the $2,285 horizontal support before positioning for any further losses. The commodity might then accelerate the fall towards the next relevant support near the $2,254-2,253 region. The downward trajectory could extend further towards the $2,225-2,220 area en route to the $2,200 round figure.

On the flip side, the 50-day Simple Moving Average (SMA) support breakpoint, currently pegged near the $2,344-2,345 region, is likely to act as an immediate strong barrier. This is followed by the $2,360-2,362 supply zone, which, if cleared decisively, might prompt some short-covering rally and lift the Gold price to the $2,387-2,388 intermediate hurdle en route to the $2,400 mark. A sustained strength beyond the latter will negate any near-term negative bias and allow the XAU/USD to challenge the all-time peak, around the $2,450 region touched in May.

 

Daily Digest Market Movers: Gold price is pressured by the hawkish Fed-inspired USD strength

  • The Federal Reserve adopted a more hawkish stance at the end of the June policy meeting, which continues to act as a tailwind for the US Dollar and is seen undermining the non-yielding Gold price. 
  • That said, weaker US consumer and producer prices data released last week indicated that inflation is subsiding, which keeps hopes alive for two Fed rate cuts in 2024, in September and in December. 
  • Adding to this, the Labor Department reported on Friday that US import prices unexpectedly declined for the first time in five months in May, providing another boost to the domestic inflation outlook.
  • Furthermore, the University of Michigan survey showed that consumer sentiment touched its lowest level in seven months in June and the index fell to 65.6 from 69.1 in May, missing consensus estimates. 
  • Cleveland Federal President Loretta Mester said on Friday that we are starting to see inflation move down again after stalling and that it is important not to wait too long to start cutting interest rates.
  • Mester, in an interview with CNBC, added that she would like to see a longer run of good-looking inflation data and that the path towards the Fed's 2.0% inflation goal may take longer than expected.
  • Chicago Fed President Austan Goolsbee noted that he still wants to see further progress on inflation and that if inflation behaves as it did in the first quarter, we will have a hard time cutting rates.
  • Minneapolis Fed President Neel Kashkari said on Sunday that we need to see more evidence to convince inflation is heading to 2% and that the central bank will wait until December to cut rates.
  • This raises doubts about the Fed's rate-cut path, which might cap any meaningful appreciating move for the buck and lend some support to the XAU/USD amid geopolitical risks and political uncertainty. 

 

Technical Analysis: Gold price seems vulnerable while below 50-day SMA support breakpoint

From a technical perspective, traders need to wait for a sustained break and acceptance below the $2,300 mark before placing fresh bearish bets around the Gold price. Hence, it will be prudent to wait for some follow-through selling below the $2,285 horizontal support before positioning for any further losses. The commodity might then accelerate the fall towards the next relevant support near the $2,254-2,253 region. The downward trajectory could extend further towards the $2,225-2,220 area en route to the $2,200 round figure.

On the flip side, the 50-day Simple Moving Average (SMA) support breakpoint, currently pegged near the $2,344-2,345 region, is likely to act as an immediate strong barrier. This is followed by the $2,360-2,362 supply zone, which if cleared decisively might prompt some short-covering rally and lift the Gold price to the $2,387-2,388 intermediate hurdle en route to the $2,400 mark. A sustained strength beyond the latter will negate any near-term negative bias and allow the XAU/USD to challenge the all-time peak, around the $2,450 region touched in May.

 

US Dollar price in the last 7 days

The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the strongest against the Euro.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   0.75% 0.45% -0.13% -0.22% 0.39% -0.13% -0.62%
EUR -0.75%   -0.30% -0.89% -0.98% -0.37% -0.88% -1.38%
GBP -0.45% 0.31%   -0.58% -0.67% -0.05% -0.59% -1.06%
CAD 0.13% 0.88% 0.57%   -0.09% 0.53% 0.01% -0.50%
AUD 0.26% 1.00% 0.71% 0.09%   0.63% 0.12% -0.37%
JPY -0.39% 0.37% 0.06% -0.51% -0.61%   -0.53% -1.01%
NZD 0.13% 0.87% 0.58% 0.00% -0.10% 0.52%   -0.50%
CHF 0.62% 1.36% 1.06% 0.50% 0.40% 1.01% 0.49%  

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