- Gold Price braces for the weekly loss despite sluggish US Dollar, taking offers to poke weekly low of late.
- XAU/USD retreats as hawkish central bank actions, fears of higher rates join downbeat statistics from major economies.
- Growth figures from Japan, Eurozone and United States employment clues eyed for clear directions of the Gold Price.
Gold Price (XAU/USD) remains bearish around the weekly low after snapping a two-day winning streak with a heavy loss to around $1,939 by the press time of early Thursday morning in Asia. In doing so, the precious metal bears the burden of the market’s fears of slowing economic growth and higher rates, as well as the firmer United States Treasury bond yields, even if the US Dollar remains sluggish.
Gold Price suffers from fears of economic slowdown, higher rates
Gold Price bears the burden of the recent challenges to the major economies, as perceived from the latest downbeat statistics from the United States, China, Europe and the UK. Adding strength to the economic pessimism are the fears of higher interest rates from the top-tier central banks, especially after the latest hawkish surprises from the Reserve Bank of Australia and the Bank of Canada (BoC).
“The global economy is set for a weak recovery over the coming years as persistent core inflation and tighter monetary policy weigh on demand,” per the latest Organisation for Economic Co-operation and Development (OECD) report published Wednesday. The same raises doubts on the XAU/USD demand as China trade numbers trace the last week’s downbeat activity data while the German Industrial Production followed the previous day’s Factory Orders after marking the easy growth figure earlier. That said, the US activity numbers have been downbeat and the Goods And Services Trade Balance also disappointed the previous day.
Not only the growth fears but the concerns surrounding the higher rates amid sluggish economic transition also weigh on the Gold Price.
On Wednesday, the Bank of Canada (BoC) surprised markets by announcing 25 basis points (bps) increase to increase the benchmark interest rate, to 4.75%, versus market expectations supporting no change in the previous rate of 4.50%. Earlier in the week, the RBA surprised markets for the second time in a row by announcing a 25 basis points (bps) rate hike.
Elsewhere, the market’s bets on the Federal Reserve’s 25 bps rate hike in July increased, even as the June Federal Open Market Committee (FOMC) is likely to keep the rates unchanged. Even so, the OECD said, “(It) sees US Fed funds rate peaking at 5.25%-5.5% from Q2 2023, followed by two ‘modest’ cuts in H2 2024.”
Rising yields weigh on the XAU/USD
With the growth fears and hawkish central bank actions, as well as signals, the US Treasury bond yields rallied and weighed on the Gold Price the previous day. That said, the benchmark US 10-year Treasury bond yields rose the most in five weeks to 3.79% while the two-year counterpart marched to 4.52% at the latest.
It should be noted that the looming fears of a $1.0 bond issuance by the United States Treasury Department, due to the debt-ceiling deal, also prods the market sentiment and weigh on the bond price, as well as bolster the yields. The same exert downside pressure on the Gold Price.
While portraying the mood, Wall Street closed in the red whereas commodities and Antipodeans closed in the red.
Looking forward, growth numbers from Japan and Europe will join the weekly US Jobless Claims to entertain the Gold traders but risk catalysts and the bond market moves will be crucial to watch for clear directions.
Gold Price Technical Analysis
Gold Price breaks a one-week-old ascending support line while reversing the previous weekly gains.
That said, the steady conditions of the Relative Strength Index (RSI) line, placed at 14, join a looming bear cross on the Moving Average Convergence and Divergence (MACD) indicator to suggest further grinding of the XAU/USD towards the south.
With a clear downside break of the aforementioned support line, now resistance near $1,943, the Gold Price confirms a fall toward the monthly, as well as the yearly low, marked in the last week around $1,932.
In a case where the XAU/USD remains bearish past $1,932, the odds of witnessing a fall towards the 61.8% Fibonacci Expansion (FE) of May 10 to June 02 moves, near $1,910, can’t be ruled out.
On the contrary, the Gold Price recovery remains elusive unless the quote crosses the three-week-old horizontal resistance area surrounding $1,985, quickly followed by the 200-SMA level of around $1,987. That said, the support-turned-resistance line restricts immediate upside near $1,943.
Even if the XAU/USD crosses the $1,987 hurdle, the $2,000 psychological magnet will be crucial for the Gold buyers to surpass to tighten the grip.
Gold Price: Four-hour chart
Trend: Further downside expected
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.