- The price of gold marks a three-day uptrend as it swings around a monthly high, recently hitting an intraday low.
- Risk appetite wanes amid headlines surrounding China, pre-NFP anxiety.
- Recession fears, Fedspeak also contribute to market indecision.
- The US ISM manufacturing PMI may grace the calendar ahead of the key services PMI, employment report for July.
The price of gold (XAU/USD) remains under pressure despite rebounding from the intraday low, down for the first time in four days, as buyers take a breather around the one-month high. That said, the yellow metal recently hit $1,763, having refreshed the intraday low at $1,760 during Monday’s Asian session.
The recent weakness in the rating could be attributed to the market feeling cautious ahead of the key US jobs report for July, as well as renewed Sino-US squabbling. Additionally, Friday’s bullish impressions of the Fed’s favorite inflation gauge and the hawkish Fedspeak are also weighing on XAU/USD prices.
Speaker of the United States House of Representatives Nancy Pelosi begins her visit to Asia, but the program does not mention her visit to Taiwan. The reason could be attributed to warnings from Beijing. “Six people familiar with the Chinese warnings said they were significantly stronger than the threats Beijing has made in the past when it was unhappy with US actions or policies toward Taiwan,” the official said. Financial Times (FT).
That said, the US Personal Consumer Expenditure (PCE) price index, the Fed’s favorite gauge of inflation, hit 4.8% year-on-year in June, down from 4.7% previously. . Following that, Minneapolis Fed President Niel Kashkari told The New York Times (NYT) that the Fed was still far from backing off rate hikes. The policymaker added, “Hiring rates by half a point at upcoming Fed meetings seems reasonable to me.”
It should be noted, however, that the recent drop in US Treasury yields and the strengthening of equities appear to have weighed on the US dollar, which in turn is supporting the price of gold. Additionally, comments by US Federal Reserve (Fed) Chairman Jerome Powell emphasizing data dependency and neutral rates joined the US “technical recession” in supporting gold’s recovery in the over the past two weeks.
Amid these plays, S&P 500 futures are posting slight losses, but US Treasury yields are consolidating a recent decline around 2.66%, up two basis points (bps).
Subsequently, the US ISM manufacturing PMI for July, expected at 52 vs. 53 previously, may lead immediate XAU/USD moves ahead of the US ISM services PMI for the month in question. Fedspeak and headlines around China will also be important. However, particular attention will be paid to Friday’s US Non-Farm Payrolls (NFPs) amid calls for neutral rates and an economic slowdown.
The overbought RSI (14) seems to have triggered the pullback in the price of gold after the previous week’s multiple failures to break through the 200-SMA.
However, a successful break of the downtrend line from June 12, around $1,746 at press time, keeps XAU/USD buyers hopeful.
Even if metal prices dip below $1,746, a convergence of the 50-SMA and 1-week support line near $1,727 will be hard for short-term bears to break.
Alternatively, the rise in gold price above the 200-SMA level around $1,770 needs to be validated from the July 1 low near $1,785 to convince buyers.
Thereafter, the 61.8% Fibonacci retracement of the June-July downturn near $1,805 may challenge the XAU/USD bulls.
Overall, gold is likely to experience a pullback, but bears should remain cautious until they see a sustained break of the $1,727 support.
Gold: four-hour chart
Trend: expected decline