Rising recession risks keep safe-haven demand for the yellow metal alive. With the effect of this, the gold price is holding the weekly losses on Wednesday at around $1,822. However, a stronger US dollar and anxiety ahead of key data/events are testing the price’s recent upside momentum.
“The drop in interest rates is likely to provide some support for the yellow metal”
Gold continues this week’s bearish dip from the all-important 200-day SMA. It fell for the third consecutive day on Wednesday. The decline brought spot prices to nearly two-week lows around the $1,816-1,815 region in the early European session.
New York Fed President John Williams and San Francisco’s Mary Daly made hawkish statements overnight. That, in turn, raised the stakes for a faster policy tightening by the US central bank. It also helped the US dollar strengthen the previous day’s strong rise. According to market analyst Haresh Menghani, this weakened demand for dollar-denominated gold. The analyst makes the following assessment:
But market participants are divided over the need for a more aggressive Fed rate hike amid growing recession fears. There is a widespread cautious market mood. It is possible that this will provide a fresh drop in US Treasury yields and some support for the yellow metal. It’s also likely to help him limit deeper losses.
Gold and Bitcoin investors watch central bank governors
The analyst also says that traders can avoid making aggressive bets. In this way, it considers it likely that they would prefer to avoid the risk of important events. Meanwhile, gold and Bitcoin investors will keep their eyes on the speeches of central bank presidents. Fed Chairman Jerome Powell, Bank of England Governor Andrew Bailey and European Central Bank Governor Christine Lagarde will speak at the ECB forum in Sintra, Portugal, today. The analyst interprets the impact of the conversations as follows:
Investors will look for new clues about the central bank’s tightening path, which will play a key role in driving the gold price higher in the near term. Apart from that, broader market risk sentiment, US bond yields and USD price dynamics will help determine the next leg of a directional move for gold.
“RR for Gold drops for third week in a row”
Reuters mocked the European Central Bank’s (ECB) plans to reveal details of its bond-buying plan. This news, as you follow on Kriptokoin.com, augments the cautious mood of the gold and Bitcoin market. However, ECB Chief Economist Philip Lane sees the double risk of inflation and economic slowdown. Recent weakness in macro data is compounded by inflation fears and geopolitical struggles surrounding Russia and China. This increases the risk of economic slowdown.
Market analyst Anil Panchal also shares the following data. Risk reversal (RR) for gold dropped to -0.125 for the third week in a row, against -0.350 the last one. The daily RR, that is, the difference between calls and puts, makes the most drop of a week to -0.135 at the latest.
“US PCE data likely to entertain gold traders”
However, Fed policymakers are trying not to repeat the latest rate hike trajectory in subsequent moves. That’s why he seems cautious about cheering up the risk-off mood for the US dollar. Still, there has been a jump in one-year retail inflation expectations in the US. This allows DXY to renew its weekly top near 104.60. In addition, the analyst makes the following assessment:
However, gold traders need to pay attention to the monetary policy discussions among central bankers from the US, UK and the European Union (EU) at the ECB Forum. This is important for a new momentum. Before that is the US Core Personal Consumption Expenditure (PCE) for the first quarter of 2022. The data, which is expected to remain stable at 5.1%, is likely to entertain traders.
Technical view of gold
Market analyst Anil Panchal analyzes the technical outlook for gold as follows. Gold showed multiple failures to surpass the 23.6% Fibonacci retracement (Fibo.) on June 12-14. This joins the recently stable RSI (14) to show that the metal is more bearish.
However, the latest low surrounding $1,818 could offer support before diverting the price to the lower line of the two-week bearish channel. Following that, it is possible to test the $1,800 threshold and $1,805 monthly low before leading the bears to the annual low near $1,786.
Alternatively, the aforementioned Fibo. A clear upside break of the hurdle near $1,823 is likely to extend the corrective pullback towards the 50-HMA and 200-HMA around $1,825 and $1,832, respectively. However, the gold bears remain hopeful until the prices are below the resistance line of the indicated channel.
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