- The price of gold saw some selling on Monday amid relentless buying interest in the dollar.
- Bets on more aggressive rate hikes by the Fed pushed the dollar to a new 20-year high.
- Recession fears weighed on investor sentiment and helped limit XAU/USD’s losses.
the price of gold fell during the first hour of the North American session and fell to the $1,934 area in the last hour, approaching again its lowest level since September 2021, touched on Friday. The drop was sponsored exclusively by the appearance of an aggressive purchase of US dollars, which tends to undermine the commodity denominated in dollars.
Indeed, the dollar index soared to a new 20-year high and continued to be supported by expectations that the Federal Reserve would maintain its monetary policy tightening path to curb rising inflation. These bets were reinforced by last week’s FOMC meeting minutes, which stressed the need to fight inflation, even if it means an economic slowdown. Policy makers indicated that another rate hike of 50 or 75 basis points is likely at the next FOMC meeting in July. Therefore, the market’s attention is now focused on the latest US consumer inflation figures, due to be released on Wednesday.
Meanwhile, the prospect of rapidly rising interest rates and tightening financial conditions continued to fuel concerns about the global growth outlook. This, in turn, dampened investors’ appetite for perceived riskier assets, reflected in the generally weaker tone of equity markets, and offered some support to safe-haven gold. The flight to safety triggered a further decline in US Treasury yields and was seen as another factor helping to limit deeper losses for the yellow metal, which is out of yield, at least for now.
The mixed fundamental picture warrants some caution on the part of bearish traders and before positioning for any further downside moves in the short term. Even from a technical standpoint, recent range-bound price action over the past three trading sessions points to traders’ indecision about the next leg of a directional move. Therefore, a sustained weakness below the $1,733 region is needed to confirm a further breakout, which would make the price of gold vulnerable to testing the $1,700 level in the short term.
Technical levels
Source: Fx Street
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