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Gold price struggles near multi-month low, bearish potential intact ahead of US macro data

  • Gold price enters a bearish consolidation phase near a multi-month low touched on Wednesday.
  • The prevalent risk-off environment is seen lending some support to the safe-haven XAU/USD.
  • Bullish USD and elevated US Treasury bond yields cap the attempted intraday recovery move.

Gold price (XAU/USD) struggles to gain any meaningful traction on Thursday and oscillates in a narrow trading band through the first half of the European session. This comes on the back of the previous day's slump – marking its biggest single-day fall in two months – to its lowest level since March 13 and might now be categorized as a bearish consolidation phase. The prevalent risk-off environment – as depicted by a generally weaker tone around the equity markets – is seen as a key factor acting as a tailwind for the safe-haven precious metal.

The supporting factor, to a larger extent, is offset by rising bets for further policy tightening by the Federal Reserve (Fed), which remains supportive of elevated US Treasury bond yields and caps the non-yielding Gold price. The US central bank last week warned that stick inflation was likely to attract at least one more interest rate hike by the end of this year.  Moreover, the US economic resilience should allow the Fed to stick to its hawkish stance. This, along with the underlying bullish sentiment surrounding the US Dollar (USD) keeps a lid on the XAU/USD.

Traders might now prefer to wait on the sidelines ahead of the US Core PCE Price Index on Friday, which will provide fresh cues about the Fed's future rate-hike path and help determine the short-term trajectory for the Gold price. In the meantime, Thursday's US macro data – the final Q2 GDP and the Weekly Initial Jobless Claims – might influence the USD. Apart from this, the broader risk sentiment might contribute to producing short-term trading opportunities.

Daily Digest Market Movers: Gold price languishes near multi-month low amid Fed rate hike jitters

  • Investors remain worried about China's property sector and headwinds stemming from rapidly rising borrowing costs.
  • Republican US House Speaker Kevin McCarthy on Wednesday rejected a stopgap funding bill advancing in the Senate.
  • This brings the US government closer to its fourth shutdown in a decade and further takes its toll on the risk sentiment.
  • Hawkish comments by influential Fed policymakers reaffirm bets for at least one more interest rate hike by the year-end.
  • The better-than-expected US Durable Goods Orders data ensures that the Fed will keep interest rates higher for longer.
  • The US Dollar consolidates its recent gains to a 10-month high and the 10-year US Treasury yields flirt with a 16-year top.
  • Thursday's US economic docket features the release of the final US Q2 GDP and the usual Weekly Initial Jobless Claims.
  • The US Core PCE Price Index, due on Friday remains in focus for cues about the Fed's future interest rate-hike path.

Technical Analysis: Gold price remains vulnerable to extending its downward trajectory

From a technical perspective, the Relative Strength Index (RSI) on the daily chart has just started drifting in the oversold zone and holding back traders from placing fresh bearish bets around the Gold price. This makes it prudent to wait for some near-term consolidation or a modest rebound before positioning for a further depreciating move. The lack of any buying interest, however, suggests that the path of least resistance for the Gold price is to the downside. Hence, a subsequent fall towards testing the next relevant support near the $1,860-1,858 region, en route to the $1,820 area, looks like a distinct possibility.

US Dollar price this week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Canadian Dollar.

 USDEURGBPCADAUDJPYNZDCHF
USD 1.22%0.52%0.17%0.98%0.63%0.23%1.23%
EUR-1.23% -0.71%-1.06%-0.23%-0.61%-1.01%0.00%
GBP-0.53%0.71% -0.35%0.49%0.11%-0.29%0.71%
CAD-0.17%1.05%0.35% 0.83%0.45%0.05%1.05%
AUD-0.99%0.22%-0.48%-0.83% -0.38%-0.78%0.23%
JPY-0.63%0.61%-0.09%-0.46%0.37% -0.40%0.61%
NZD-0.24%0.99%0.29%-0.06%0.77%0.40% 1.00%
CHF-1.24%-0.01%-0.71%-1.06%-0.22%-0.60%-1.01% 

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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