- The gold price gained some positive traction on Monday amid continued dollar profit-taking.
- Diminishing odds of a more aggressive Fed rate hike weighing on the dollar and extending support.
- The boost in risk appetite and the rally in US bond yields act as a headwind, capping the pair.
the price of gold It starts the week on a positive note and is moving away from the almost one-year low reached last week. However, the intraday rally lacks bullish conviction and runs out of steam just before reaching the $1,725 ​​level. XAU/USD last traded around the $1,715-$1,716 area during the first hour of the North American session, up more than 0.50% on the day.
The price of gold is supported by the retreat of the USD
The US dollar extends last week’s pullback from two-decade highs and witnesses strong selling for the second day in a row amid diminishing odds that the Fed will raise interest rates by 100 basis points in July. . This, in turn, is seen as a key factor offering some support to dollar-denominated gold. Several Federal Reserve officials signaled last week that they were not in favor of the higher rate hike that markets had anticipated. Investors, it should be remembered, raised their bets on a large Fed rate hike after US consumer inflation accelerated in June to the highest level since November 1981.
Two of the FOMC’s most aggressive members – Fed Governor Christopher Waller and St. Louise Fed President James Bullard – opposed expectations of more aggressive rate hikes from the US central bank. Additionally, Atlanta Fed President Raphael Bostic warned on Friday that too drastic a move could undermine the positives in the economy and add to uncertainty. This, in turn, continued to weigh on the USD. However, a combination of factors is preventing bullish traders from placing aggressive bets and the price of gold from rising significantly, at least for the time being.
Risk Momentum Acts as Gold Price Headwind
Global equity markets are trending higher amid hopes that the Federal Reserve will be less aggressive at its next meeting than feared. The risk boost has caused a further rise in US Treasury yields, which, in turn, is acting as a headwind for safe-haven gold. Indeed, the benchmark 10-year US government bond yield has soared above the 3% threshold. This is helping to limit the dollar’s deeper losses and helping to limit XAU/USD’s gains. Therefore, it will be prudent to wait for strong follow-on buying before confirming that spot prices have bottomed.
Gold Price Technical Outlook
The price of gold has repeatedly shown some resistance below the $1,700 mark. That said, the metal’s inability to gain significant traction suggests that short-term risks remain skewed to the downside. This, in turn, suggests that any further strength beyond the immediate resistance of $1,725-$1,726 could face stiff resistance near the $1,734-$1,735 horizontal zone. A sustained move above could trigger a series of short coverings and lift XAUUSD towards the $1,749 to $1,752 supply zone.
On the other hand, last week’s low around the $1,698-$1,697 area seems to protect the immediate downside. A convincing break below would make XAU/USD vulnerable and accelerate the decline towards the September 2021 low around the $1,787-$1,786 area. The price of gold could extend the bearish trajectory towards the test of the yearly low of 2021, near the zone of $1,677 to $1,676.
-637937482873164997.png)
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
