- Gold price is holding firm around $1,920, supported by falling US Treasury yields.
- Strong US economic data justifies the Fed’s tightening stance, but lower inflation numbers weigh on the Dollar.
- Markets are awaiting the upcoming US economic data and FOMC Meeting Minutes for further direction on gold prices.
Gold price is holding firm around $1,920 after hitting a daily low of $1,919.89 in subdued trading session as European markets closed while Wall Street remains subdued in observance of Day of US Independence. Falling US Treasury yields provided a lifeline for XAU/USD traders, aiming to recapture the $1,950 zone, although US data The United States (US) could increase demand for the dollar, a headwind for XAU prices.
Subdued trade and US economic data will determine the path of XAU/USD
Risk appetite improved throughout the overnight session amid a lack of economic data, with the Reserve Bank of Australia’s (RBA) monetary policy decision being the highlight. The RBA kept rates unchanged, although it opened the door for further tightening if necessary. Apart from this, the US economic data released in the last two weeks has shown the resilience of the US economy amid 500 basis points of tightening by the Federal Reserve (Fed). Durable Goods Orders for June, Consumer Confidence and the Gross Domestic Product (GDP) figure for the first quarter, which improved, with the latter almost doubling the preliminary GDP reading of 1.1%, justified the Fed’s stance of raise rates.
However, inflation data, particularly the Fed’s preferred gauge, PCE and core PCE for June, fell. This affected the Dollar, as the Dollar Index (DXY), which tracks the Dollar against a basket of currencies, fell 0.42% after the data was released, but has so far pared some of those losses, trades at 103,010, up 0.03% on Tuesday.
US Treasury yields lacked the strength to rise further as investors brace for a 25 basis point (bp) Fed rate hike in July, CME’s FedWatch tool shows. However, market participants remain reluctant to believe that Fed Chairman Jerome Powell and his colleagues will raise the FFR towards the 5.50%-5.75% range.
XAU/USD traders would have more clues as to the direction of the unprofitable metals as the US economic calendar remains busy. On Wednesday, factory orders and the latest FOMC meeting minutes will shed some light on the trajectory of US central banks. On Thursday and Friday, the ISM services PMI and labor market data could add to the volatility of the yellow metal. The upbeat numbers will fuel speculation about not just one, but the two rate hikes mentioned by Powell in his last public appearance.
XAU/USD Price Analysis: Technical Perspective
XAU/USD has a neutral bias to the downside, capped to the upside by the 20-day EMA at $1,932.48, which also intersects the May 30 daily low at $1,932.20. If XAU/USD were to resume the uptrend, buyers should retrace the aforementioned zone to challenge the 50-day EMA at $1,948.51, before testing $1,950. Conversely, if the XAU/USD sustains below the strong supply zone around the $1,932 zone, sellers could drag prices towards the 200 day EMA at $1,896.61, as the index of relative strength (RSI) remains in bearish territory.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
