- Gold struggles to maintain its intraday gains until reaching a new weekly high hit this Friday.
- Prospects for aggressive Fed policy tightening continue to act as a headwind.
- The appearance of new purchases of dollars puts additional downward pressure on the metal.
The Prayed trims much of its intraday gains to a new weekly high hit this Friday and pulls back below the $1,665 level during the early American session.
Despite growing fears of recession and geopolitical risk, the haven XAU/USD it has been struggling to gain any significant traction amid the Fed’s commitment to bring inflation under control. Investors seem convinced that the US central bank will maintain its aggressive cycle of rate hikes and have been eyeing the possibility of another 75 basis point rate hike in November. These bets were bolstered by the release of US Personal Consumption Expenditure (PCE) data on Friday, which continues to act as a headwind for underperforming gold.
Aside from this, the resurgence in demand for US dollars turns out to be another factor putting additional downward pressure on dollar-denominated commodities. Indeed, the dollar index, which measures the dollar’s performance against a basket of currencies, is recovering strongly from a weekly low and, for now, appears to have halted this week’s sharp pullback from two-decade highs. That said, the effect of the Bank of England’s move to calm markets is dragging 10-year US Treasury yields away from a 12-year high set on Wednesday.
This, in turn, deters dollar bulls from making aggressive bets. Other than this, the prevailing risk environment is somewhat supportive for gold and should help limit the downside, at least for now. Nonetheless, the precious metal remains on track for its sixth straight month of losses and the biggest quarterly drop since early 2021.
Technical levels to watch
Source: Fx Street
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