- Gold price ticks down during the Asian session on Wednesday, though lacks follow-through.
- Hawkish central banks and a modest US Dollar strength act as a headwind for the XAU/USD.
- Traders now keenly await the FOMC meeting minutes before placing fresh directional bets.
Gold price edges lower during the Asian session on Wednesday and erodes a part of the previous day's modest gains back closer to the $1,930-$1,931 region or the weekly top. The XAU/USD currently trades around the $1,924-$1,923 region, down less than 0.10% for the day, as traders keenly await the release of the Federal Reserve’s (Fed) latest monetary policy meeting minutes.
Focus remains on June FOMC meeting minutes
The Fed had indicated the need for a 50 basis points (bps) interest rate hike before the end of the year at the end of the June 13-14 policy meeting. That said, the incoming macro data from the United States (US) raised questions over how much headroom the Fed has to continue tightening its monetary policy. In fact, the US Bureau of Economic Analysis reported last Friday that inflation pressures eased slightly in May as consumer spending slowed considerably. Furthermore, the Institute for Supply Management's (ISM) Manufacturing PMI registered the eighth straight month of contraction and dropped to its lowest level since May 2022. Hence, the minutes will be closely scrutinised for clues about the Fed's future rate-hike path, which, in turn, will play a key role in determining the next leg of a directional move for the non-yielding Gold price.
Hawkish central banks weigh on Gold price
In the meantime, growing acceptance for a 25-bps lift-off at the next Federal Open Market Committee (FOMC) policy meeting on July 25-26 remains supportive of elevated US Treasury bond yields and acts as a tailwind for the US Dollar (USD). This, in turn, is seen as a key factor weighing on the US Dollar-denominated Gold price. Apart from this, a hawkish outlook by other major central banks further contributes to capping gains for the XAU/USD. The downside, however, remains cushioned in the wake of worries about a global economic downturn, particularly in China, which tends to benefit the safe-haven precious metal. The concerns were further fueled by the disappointing release of China's Services Purchasing Managers' Index (PMI) on Wednesday, which tumbled to 53.9 in June from 57.1 reported in the previous month. Apart from this, the worsening US-China trade ties should help limit deeper losses for the commodity, at least for the time being.
Worsening US-China ties could help limit losses for XAU/USD
In fact, China imposed restrictions on two metals widely used in semiconductors, electric vehicles and high-tech industries. The move, which is set to take effect on August 1, could potentially cause more disruption to global supply. The Chinese commerce ministry said that the measure was aimed at safeguarding national security, though market participants view this as a response to efforts by the US to curtail China's technological advances. Nevertheless, the abrupt announcement could ramp up a trade war with the US, which might hold back traders from placing aggressive bearish bets around the Gold price. This makes it prudent to wait for strong follow-through selling before confirming that the recent recovery move from the $1,893-$1,892 area, or the lowest level since mid-March has run its course and positioning for deeper losses.
Gold price technical outlook
From a technical perspective, the $1,931 area, or the weekly high, might continue to act as an immediate barrier ahead of the 100-day Simple Moving Average (SMA), currently around the $1,942 region. A sustained strength beyond the latter might trigger a short-covering rally and lift the Gold price to the $1,962-$1,964 zone en route to the $1,970-$1,972 supply zone. Some follow-through buying should allow bulls to reclaim the $2,000 psychological mark and test the $2,010-$2,012 resistance.
On the flip side, any subsequent slide now seems to find some support near the $1,908-$1,907 area ahead of the $1,900 round-figure mark and the multi-month low, around the $1,893-$1,892 region touched last week. A convincing break below the said support levels will make the Gold price vulnerable to accelerate the downward trajectory and expose the very important 200-day Simple Moving Average (SMA), currently around the $1,860 zone.
Key levels to watch
|Today last price
|Today Daily Change
|Today Daily Change %
|Today daily open
|Previous Daily High
|Previous Daily Low
|Previous Weekly High
|Previous Weekly Low
|Previous Monthly High
|Previous Monthly Low
|Daily Fibonacci 38.2%
|Daily Fibonacci 61.8%
|Daily Pivot Point S1
|Daily Pivot Point S2
|Daily Pivot Point S3
|Daily Pivot Point R1
|Daily Pivot Point R2
|Daily Pivot Point R3
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.