- Gold meets fresh supply on Wednesday and trims a portion of overnight gains.
- Resurgent demand for dollars and rising US bond yields are putting some downward pressure on the metal.
- Recession fears could help limit XAU/USD losses ahead of Fed Powell’s meeting on Friday.
Gold veers south after an early rally to the $1,754 area and falls to a new daily low during the first North American session. The XAU/USD it reverses some of the previous day’s nice rally move to the weekly high and is currently sitting around the $1,745 level, down nearly 0.25% on the day.
The decline is supported by the appearance of new purchases around the US dollar, which tend to reduce the demand for gold denominated in dollars. Overnight comments from Minneapolis Fed President Neel Kashkari revive bets for a further tightening of US central bank policy. Additionally, the release of mostly upbeat US Durable Goods Orders data on Wednesday reaffirms the Fed’s expectations and further bolsters the greenback.
Current market prices indicate that there is an equal chance of a 50bp rate hike or a 75bp rate hike at the September FOMC policy meeting. This, in turn, triggers a further rally in US Treasuries and helps drive flows away from the underperforming yellow metal. Indeed, the benchmark 10-year government bond yield rises to a nearly two-month high and offers additional support to the dollar.
Apart from this, signs of stability in financial markets appear to weigh further on haven XAU/USD, although recession fears could help limit deeper losses, at least for now. Investors also seem reluctant and may prefer to wait for a more hawkish message from Fed Chairman Jerome Powell at the Jackson Hole symposium on Friday. This, in turn, warrants some caution for aggressive bears and positioning for any further declines.
Technical levels
Source: Fx Street
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