- Gold price is in a corrective mode after a responsive buying action from near $1,680.00.
- The DXY is attempting to break the hurdle of 107.00.
- Monetary policy announcement by the Fed is in play now.
Gold price (XAUUSD) has shifted into a corrective phase in the Asian session after displaying a juggernaut vertical upside move on Thursday. The precious metal has faced barricades around $1,720.00 as the US dollar index (DXY) has remained upbeat on Friday. Earlier, the bright metal sensed a responsive buying action after printing a fresh 11-month low of $1,680.94. Usually, a responsive buying action indicates that investors have considered the asset a value bet and have channelized significant bids.
Meanwhile, the US dollar index (DXY) is advancing firmly higher in the Asian session. The DXY has displayed a bullish open-drive session in which the asset scales strongly higher right from the first tick of the trading session. The asset has reached near the critical hurdle of 107.00 and is likely to advance gains on it violation. Despite a firmer upside move, the asset is still inside the woods and is trading inside the wide range of 106.39-107.32 from Tuesday.
Fed chair Jerome Powell to hike interest rates by 75 bps next week.
Fed seizes focus as more rate hikes look imminent
The Federal Reserve (Fed) is going to announce the interest rate decision next week. A light economic calendar, this week, kept the DXY’s dependency on other macro-economic events. The odds of a rate hike by 100 basis points (bps) have plunged after the release of the long-run inflation expectation on the lower side last week. However, runaway inflation still persists and chances of a consecutive rate of 75 bps are sky-rocketing. This could put the gold prices on tenterhooks.
Gold price fades hawkish ECB
Gold price has displayed a juggernaut recovery after printing a fresh 11-month low near $1,680.00. The precious metal has ignored the hawkish stance and guidance from the European Central Bank (ECB) revealed on Thursday.
The ECB elevated its interest rates by 50 bps. ECB President Christine Lagarde unexpectedly announced a rate hike by half a percent vs. expectations of 25 bps. Credit goes to the soaring price pressures which forced the ECB policymaker to feature a jumbo rate hike. Earlier, ECB Large in his testimony guided that the ECB is interested in elevating interest rates by 25 bps in July and later on by 50 bps in September.
Falling yields support gold bulls
The major factor behind the firmer recovery in gold prices is the falling US Treasury yields after the interest rate hike by the ECB for the first time in the past 11 years. Hawkish ECB dragged the 10-year US Treasury yields below 3% and are likely to drag further to near 2.70% as guidance from ECB President Christine Lagarde is extremely hawkish. Also, the introduction of the ‘Transmission Protection Instrument’ (TPI) to support southern European economies was the key highlight of ECB monetary policy.
S&P Global PMI to remain in focus
Due to a light economic calendar this week, investors’ focus will remain on the release of the S&P Global PMI data. As per the market consensus, the economic catalysts are expected to deliver a weak performance. The Global Composite data is seen at 51.7, lower than the prior release of 52.3. The Manufacturing PMI may slip to 52 vs. 52.7 recorded earlier. While the Services PMI is expected to display a mild correction to 52.6 against the former figure of 52.7. This will keep the DXY on the back foot and may support the gold prices.
Gold technical analysis
Gold price has attacked the former balance area, which is placed in a wide range of $1,697.69-1,723.27 on the four-hour scale. A responsive buying action has pushed the gold prices above the 20-period Exponential Moving Average (EMA) at $1,708.65. Also, the precious metal has attacked the 50-EMA at $1,718.06, which indicates that the gold bulls are attempting a bullish reversal after a prolonged downside move.
Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the 40.00-60.00 range from the bearish range of 20.00-40.00, which indicates that the gold bulls are not actively bearish.
For more upside, the gold bulls need to surpass Monday’s high at $1,723.97, which will drive the asset July 14 high at $1,733.68, followed by July 13 high at $1,745.49.
Alternatively, broader weakness in the asset could trigger again and the gold price will find itself near Thursday’s low to near $1,680.00 after surrendering the psychological support of $1,700.00. A breach of the former will force the asset to form a fresh yearly low of around $1,670.00.
Gold four-hour chart
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