- The price of gold is moving lower at the beginning of the European session on Wednesday, although it lacks continuation.
- The hawkish central banks and the modest strength of the US dollar act as a headwind for XAU/USD.
- Traders await the release of the FOMC meeting minutes before opening new directional positions.
The price of Gold (XAU/USD) moves lower at the start of the European session on Wednesday, returning some of the previous day’s modest gains near the $1,930-$1,931 area. XAU/USD is currently trading around the $1.924-$1.923 zone, down less than 0.10% on the day as investors look forward to the publication of the minutes of the last monetary policy meeting of the Federal Reserve (Fed).
Attention remains focused on the June FOMC meeting minutes
The Fed had indicated the need for an interest rate hike of 50 basis points (bp) before the end of the year at the end of the monetary policy meeting on June 13 and 14. However, the new macroeconomic data from the United States raise questions about the Fed’s room for maneuver to further tighten its monetary policy. In fact, the US Bureau of Economic Analysis reported last Friday that inflationary pressures eased slightly in May, as consumer spending slowed considerably. Besides, the manufacturing PMI of the Institute of Supply Management (ISM) registered the eighth consecutive month of contraction and fell to its lowest level since May 2022. Therefore, the minutes will be closely scrutinized for clues about the future rate-hike path of the Fed, which, in turn, will play a key role in determination of the next directional movement for the price of gold without yield.
Hardline central banks weigh on gold price
Meanwhile, the growing acceptance of a 25 basis point hike at the upcoming Federal Open Market Committee (FOMC) monetary policy meeting on July 25-26 continues to support high US Treasury yields. and acts as a tailwind for the US dollar (USD). This, in turn, is seen as a key factor weighing on the dollar-denominated gold price. Besides, hawkish views from other central banks help limit XAU/USD gains. However, concerns about a global economic downturn, especially in China, which tends to benefit precious metals as a safe haven, continue to dampen the decline. The publication on Wednesday disappointing Purchasing Managers’ Index (PMI) for the Chinese services sector, which fell to 53.9 points in June from 57.1 the previous month, further fueled the concern. Apart from this, the worsening trade ties between the US and China it should help limit deeper losses in the yellow metal, at least for now.
Worsening US-China ties could help limit XAU/USD losses
In fact, China imposed restrictions on two metals widely used in semiconductors, electric vehicles and high-tech industries. The measure, which takes effect on August 1, could cause further global supply disruption. The Chinese Ministry of Commerce stated that the measure was aimed at safeguard national security, although market participants see it as a response to US efforts to curb China’s technological advances. Nevertheless, the announcement could escalate the trade war with the US.which could stop traders from entering aggressively short positions around the gold price. Therefore, it is prudent to wait for strong selling before confirming that the recent recovery move from the $1,893 area -$1,892, the lowest level since mid-March, is over and positioning for further losses.
Gold Price Technical Outlook
From a technical perspective, the zone of $1,931or the weekly high, could continue to act as an immediate barrier ahead of the 100-day SMA, currently around the region of $1,942. Sustained strength above this last level could trigger a short-covering rally and push the price of gold into the trading zone. $1,962-$1,964 on the way to the resistance zone of $1,970-$1,972. Some continuation buying should allow the bulls to recover the psychological level of the $2,000 and test the resistance of the $2,010.
On the other hand, any further decline seems to find support near the zone of $1,908-$1,907ahead of the round level of $1,900 and the minimum of several months, around the zone of $1,893-$1,892, played last week. A convincing break below these support levels will leave the gold price vulnerable to accelerating the downside and exposing the all-important 200-day SMA, currently hovering around the $1,860.
Gold additional technical levels
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.
