XAU/USD outlook: Gold remains at the back foot ahead of Fed, inflation data

Slobodan Drvenica Windsor Brokers

Gold price eases for the third straight day and retests very important $4000 support on Wednesday, as initial enthusiasm about diplomatic action replacing hostilities in the Middle East, faded after fresh attacks of US / Saudi armies on Iraq.

The dollar firmed, keeping the yellow metal in defensive, as markets await results from Fed’s policy meeting and comments from Chairman Warsh, to get more information about the central bank’s next steps, as the Fed is widely expected to keep rates on hold in July meeting.

The latest developments in the Middle East warn of fresh pressure on prices (if the situation escalates further) that may keep gold at the back foot, especially if policymakers show more hawkish stance today.

Focus will be also on release of US June PCE price index (Fed’s preferred inflation gauge), due on Thursday, which would add more details to inflation picture.

Overall, the metal is expected to remain under increased pressure, especially if Fed hints more policy tightening (markets already bet for rate hike in September), with eventual break below $4000 to trigger fresh acceleration lower.

Res: 4077; 4116; 4166; 4180

Sup: 3960; 3942; 3900; 3842

Author

Slobodan Drvenica

Windsor Brokers

Industry veteran with over 22 years’ experience, Slobodan Drvenica joined Windsor Brokers in 1995 when he was an active trader for more than 10 years, managing the trading desk and own account departments.

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