- Gold Price attempts a rebound on Wednesday but not out of the woods yet.
- King dollar to regain supremacy if Fed Minutes back aggressive tightening stance.
- XAUUSD eyes $1,722 - bearish channel target on dollar gains, recession woes.
Markets wagered almost 70% chances of global recession, which wreaked havoc on the financial markets. Raging inflation, surging energy costs and aggressive Fed tightening implied concerns surrounding an economic slowdown worldwide. “Sell everything mode” followed next and the US dollar garnered massive demand as a safe-haven asset. Recession fears compounded as Europe appeared on the brink of the worst gas crisis in decades amid a protracted Russia-Ukraine war.
Amidst unabated dollar buying, Gold Price lost over 2% on Tuesday, hitting the lowest in seven months at $1,764 after the sell-off intensified on a firm break below the $1,800 threshold. Signs of inflation peaking in the US, in the face of softer core PCE Price Index and US ISM Manufacturing price paid component, also dented gold’s appeal as an inflation hedge. The late rebound in Wall Street indices and the resultant pullback in the greenback failed to inspire XAUUSD bulls even though the US Treasury yields bled across the curve. The benchmark 10-year yields tumbled to end-May levels around 2.78%, down roughly 20 bps on the day.
Gold Price is licking its wounds after the brutal sell-off, hovering close to multi-month troughs, with more downside in the offing as recession risks are here to stay. The US dollar is likely to regain its upside traction, as the FOMC June meeting’s minutes will support the Fed’s stance to move ‘expeditiously’ in order to control inflation. Should the Fed minutes reinforce expectations of a 75 bps July rate hike while leaving doors open for a 50 bps rise in September, then it would trigger another wave of risk-aversion, bolstering the haven bids for the buck. Aggressive Fed tightening bets have heightening fears of an imminent slowdown in the economy. Ahead of that, the US ISM Services PMI will also provide some trading incentives. All in all, King dollar is poised to remain in a win-win situation in the lead-up to the Fed event.
Gold Price Chart: Daily
On the daily chart, gold price is on its journey to test the rising channel measured target at $1,722 following multiple rejections near the channel support around the $1,815 region. The sustained breach of the $1,800 mark followed by the $1,785 demand area has kept sellers in the bargain position.
Selling resurgence below the $1,750 key support will prompt bears to take on the abovementioned $1,722 cap.
XAUUSD confirmed the bearish channel formation last Thursday while the death cross also remains in play, providing a double whammy to gold traders.
The 14-day Relative Strength Index (RSI) is sitting just above the oversold territory, allowing room for more downside.
Any meaningful recovery will need acceptance above the $1,785 support-turned-resistance. Further up, $1,800 the figure will be put to test.
Daily closing above the channel support now resistance at $1,817 is critical to sustaining the renewed upside in the bright metal.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD continues its downward trend for the fourth consecutive day, driven by a stronger US Dollar influenced by the hawkish market sentiment surrounding the Federal Reserve and expectations of prolonged higher interest rates.
GBP/USD: The first downside target is seen at the 1.2600–1.2605 zone
GBP/USD trades on a weaker note around 1.2620 during the early European session on Friday. The decline of Pound Sterling is backed by the growing speculation that the BoE will begin the rate-cut cycle this year.
Gold ends Q1 2024 at record highs, what’s next?
Gold is sitting at an all-time high of $2,236, lacking a trading impetus amid holiday-thinned conditions on Good Friday. Most major world markets, including the United States are closed in observance of Holy Friday, leaving volatility around Gold price highly subdued.
Ripple's move above this key level could trigger nearly 50% rally for XRP
Ripple price has overcome a critical resistance level and flipped into a support floor on the weekly time frame. This development happened while XRP tightly consolidated for roughly 250 days.
US core PCE inflation set to ease in February on month as Federal Reserve rate cut bets for June mount
The core Personal Consumption Expenditures Price Index is set to rise 0.3% MoM and 2.8% YoY in February. The revised Summary of Projections showed that policymakers upwardly revised end-2024 core PCE forecast to 2.6% from 2.4%.