- The gold price gained some traction on Thursday and snapped a three-day losing streak to a year low.
- The dollar’s modest retreat from 20-year highs was seen as a key factor benefiting the commodity.
- Bets on a Fed rate hike, a rebound in US bond yields and a positive risk tone could limit gains.
the price of gold rallied on Thursday and, for the moment, appears to have broken a three-day losing streak to its lowest level since September 2021, around the $1,732 area touched overnight. XAU/USD maintained its modest recovery gains during the first half of the European session and was last seen near the $1,744-$1,745 region.
The US dollar witnessed some profit taking which in turn was seen as a key factor offering some support to dollar denominated gold. The rally attempt, however, lacked bullish conviction and risks fading quickly amid Fed expectations.
Markets seem convinced that the Fed will maintain its aggressive policy of tightening to combat persistent inflation. These bets were bolstered by the surprisingly flattering minutes of the FOMC meeting on June 14 and 15, with policymakers emphasizing the need to fight inflation, even if that means in an economic slowdown.
Policy makers indicated that another rate hike of 50 or 75 basis points is likely at the July meeting. This, coupled with some recovery in US Treasury yields, should act as a tailwind for the dollar. Aside from this, a positive risk tone could help limit any significant gains in safe-haven gold.
The fundamental backdrop still appears to lean heavily in favor of bearish traders and supports the prospects for further selling at higher levels. Therefore, it would be prudent to wait for strong follow-on buying before confirming that the price of gold has formed a near-term bottom and positioning for any significant gains.
Market participants are now awaiting the release of weekly jobless claims, which will be released later in the American session. This, along with scheduled speeches from Fed Governor Christopher Waller and St. Louis Fed President James Bullard, will influence dollar price dynamics and produce short-term opportunities around gold.
Technical levels
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
