- Gold drops to over a one-week low on Monday amid some follow-through USD buying interest.
- A fresh leg up in the US Treasury bond yields continues to offer some support to the greenback.
- The risk-off impulse could come in and support the safe-haven XAU/USD ahead of the FOMC.
Gold edges lower for the third successive day on Monday and drops to over a one-week low, around the $1,635 region during the first half of the European session. The US dollar builds on last week's late rebound from over a one-month low and turns out to be a key factor exerting downward pressure on the dollar-denominated commodity. The downside, however, seems limited as traders might prefer to move to the sidelines ahead of the highly anticipated FOMC monetary policy meeting this week.
The Fed is scheduled to announce its decision on Wednesday and is widely expected to deliver another supersized 75 bps rate hike. That said, signs of a slowdown in the US economy might force the Fed to soften its hawkish stance. Hence, the focus will be on the accompanying policy statement and the post-meeting press conference. Investors will look for clues about the Fed's future rate hike path, which will influence the near-term USD price dynamics and provide a fresh directional impetus to the non-yielding gold.
In the meantime, a fresh leg up in the US Treasury bond yields should act as a tailwind for the buck and weigh on the XAU/USD. However, the risk-off impulse could lend some support to the safe-haven gold, at least for the time being. Weaker-than-expected Chinese business activity data released earlier this Monday revives fears about a deeper global economic downturn and tempers investors' appetite for riskier assets. This is evident from a weaker tone around the equity markets and warrants caution for bearish traders.
Nevertheless, the fundamental backdrop suggests that the path of least resistance for gold is to the downside and any attempted recovery move could be seen as a selling opportunity. In the absence of any major market-moving economic releases, the USD remains at the mercy of the US bond yields. This, along with the broader market risk sentiment, could allow traders to grab short-term opportunities around the XAU/USD.
Technical levels to watch
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
AUD/USD gains momentum above 0.6500 ahead of Australian Retail Sales data
AUD/USD trades in positive territory for six consecutive days around 0.6535 during the early Asian session on Monday. The upward momentum of the pair is bolstered by the hawkish stance from the Reserve Bank of Australia after the recent release of Consumer Price Index inflation data last week.
EUR/USD: Federal Reserve and Nonfarm Payrolls spell action this week
The EUR/USD pair temporarily reconquered the 1.0700 threshold last week, settling at around that round level. The US Dollar lost its appeal following discouraging United States macroeconomic data indicating tepid growth and persistent inflationary pressures.
Gold trades on a softer note below $2,350 on hotter-than-expected US inflation data
Gold price trades on a softer note near $2,335 on Monday during the early Asian session. The recent US economic data showed that US inflationary pressures staying firm, which has added further to market doubts about near-term US Federal Reserve rate cuts.
Ethereum fees drops to lowest level since October, ETH sustains above $3,200
Ethereum’s high transaction fees has been a sticky issue for the blockchain in the past. This led to Layer 2 chains and scaling solutions developing alternatives for users looking to transact at a lower cost.
Week ahead: Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.