- Gold sees some selling on Tuesday and reverses some of the positive movement from the previous day.
- A positive tone around equity markets acts as a headwind for the safe-haven yellow metal.
- Falling US bond yields keep the dollar on the defensive and seem to offer XAU/USD support.
The gold price it moves lower on Tuesday and erodes some of the previous day’s strong positive movement, near the one-month highs reached last week. XAU/USD stays on the defensive during the early European session and is currently trading around the $1,785 zone, down around 0.30% on the day.
The signs of stability in equity markets seem to weigh on the safe-haven gold pricealthough a combination of factors should help limit the drop. Rising fears of a recession coupled with US-China tensions over Taiwan put a damper on any bullish moves in the markets. Aside from this, a further decline in US Treasury yields continues to weigh on the dollar, which in turn is seen as lending some support to dollar-denominated commodities. The bulls, however, seem reluctant to open aggressive positions amid speculation that the Fed will maintain its aggressive tightening policy.
In fact, the markets are valuing at 70% the chances that the Fed will raise interest rates by 75 basis points at its September meeting. Expectations were bolstered by Fed Governor Michelle Bowman’s remarks on Saturday that the US central bank should consider more hikes of 75 basis points at upcoming meetings to reduce the inflation. This, in turn, is seen as a headwind for non-yielding gold. Investors could also refrain from opening aggressive positions and prefer to stay on the sidelines before the latest US CPI consumer inflation figures are released.scheduled for Wednesday.
The US CPI report will be considered for further clues on the Fed’s monetary policy outlook. This will influence short-term dollar price dynamics and help determine the next directional move for the dollar. precious metal. Meanwhile, US bond yields will boost dollar demand amid the absence of market-relevant economic releases. Apart from this, the general market risk sentiment should produce short-term opportunities around gold. However, recent range-bound price developments point to investor indecision and warrant caution.
gold technical levels
Source: Fx Street
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