- Gold sees some selling on Friday and breaks a three-day gain streak after hitting one-week highs yesterday.
- Fed expectations help revive demand for dollars and put pressure on commodities.
- Investors will now look to the US PCE data for some momentum ahead of the Fed Chairman’s Jackson Hole appearance.
Gold is under some selling pressure on Friday and breaks a three-day gain streak after hitting a one-week high of $1,765 on Thursday. XAU/USD remains depressed during the early European session and is currently touching lows for the day at $1,750.
The US dollar regains some positive traction and recovers further from the weekly low, which turns out to be a key factor putting downward pressure on gold. The dollar’s resilience continues to be supported by the growing acceptance that the US central bank will maintain its monetary policy tightening path. These bets were bolstered by better-than-expected US macroeconomic data and hawkish comments from Fed officials on Thursday.
In fact, the head of the St. Louis Fed, James Bullard, stressed the need to keep raising interest rates. Also, Kansas City Fed President Esther George said the Fed has not yet raised rates to levels that weigh on the economy and may have to take them above 4% for a while. This, in turn, raised bets for a 75 basis point rate hike, which continues to support high US bond yields and provides additional support to the dollar.
However, policymakers withheld judgment on the size of the rate hike at the next FOMC policy meeting in September. Therefore, the focus remains on Fed Chairman Jerome Powell’s appearance at the Jackson Hole symposium. Investors will be looking for clues about the possibility of more aggressive rate hikes, which will boost demand for dollars and help determine the next leg of a directional move for gold.
As for key event risk, traders could look to the US PCE Index release on Friday, due later in the North American session. The data could influence gold, which is traditionally seen as a hedge against inflation. However, the immediate market reaction is likely to be short-lived. Meanwhile, the prevailing cautious mood could support the safe haven precious metal.
Gold Technical Levels
Source: Fx Street
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