- The price of gold declined from its daily peak of $2,403 to $2,377 as the value of the US dollar increased by 0.20%.
- Significant retail prices hinder gold demand in Asia; China’s economic concerns continue.
- Investors are closely watching the FOMC decision, JOLTS report, ADP data, and other important US economic indicators this week.
The price of gold declined on Monday due to the strengthening of the US dollar by approximately 0.20%. This occurred as investors prepared for the upcoming monetary policy decision of the Federal Open Market Committee (FOMC), scheduled to take place from July 30 to the following day. During this event, the FOMC will release a statement, and Federal Reserve Chair Jerome Powell will hold a press conference. The XAU/USD is currently trading at $2,377, following a peak of $2,403 earlier today.
Wall Street portrays a positive market sentiment, while the robust US Dollar continues to exert downward pressure on bullion prices. Reports indicated that consumer demand for Gold in Asia was affected by the steep retail prices and the economic challenges faced by China.
Furthermore, the decline in the value of the precious metal was limited due to the geopolitical risks arising from Hezbollah’s rocket attack on Israel. This attack has the potential to intensify the ongoing conflict in the Middle East.
Furthermore, traders are closely monitoring the upcoming release of vital economic data from the United States. Investors are eagerly anticipating the upcoming release of the JOLTS Job Openings report, along with the ADP Employment Change data and the highly anticipated decision from the FOMC.
Market participants anticipate that the Federal Reserve will maintain interest rates at their current levels. However, they also expect that the US central bank will set the stage for the initiation of a cycle of monetary easing. As indicated by data from the CME FedWatch Tool, traders had factored in a complete certainty of a quarter-point reduction in interest rates at the September meeting.
Fawad Razaqzada, a market analyst at Forex.com, stated that if the Federal Reserve adopts a more cautious approach, there could be an increase in forecasts, possibly leading to three interest rate cuts by the end of the year.
Furthermore, the docket will conclude the week by unveiling the Institute for Supply Management (ISM) Manufacturing PMI and the Nonfarm Payrolls report, both of which are July figures.
Gold Price Remains Low and Could Potentially Test the 50-Day SMA
- The latest US inflation data from last week showed a positive movement towards the desired 2% target. However, inflation is more persistent than expected, as the June Core PCE figures surpassed predictions for both monthly and yearly measurements.
- In addition to the Fed’s decision, two other significant central banks, the Bank of Japan and the Bank of England, will also make monetary policy decisions.
- During the forthcoming fiscal policy meeting, it is primarily predicted that the Bank of Japan, which is distinct from the other major central banks that make up the G7, would raise interest rates by 15 basis units.
- Additionally, the Bank of England is anticipated to commence its program of monetary easing on August 1, August 1.
- Traders anticipate a fall of 54 basis points (bps) in interest rates, as shown by data from the Chicago Board of Trade (CBOT). This reduction is expected to occur before the end of the year, according to the futures contract for the federal funds rate in December 2024.
The Price of Gold Has Experienced a Decline, Falling Below the $2,400 Mark
The price of gold is showing an upward trend, but even though there was a formation of a ‘bullish harami’ pattern, buyers were unable to break through the $2,400 mark, leading to a decline towards the current spot price. The market is experiencing a pause in buying activity, as indicated by the Relative Strength Index (RSI).
The XAU/USD is currently in a consolidation phase, hovering around the $2,370-$2,380 range. Traders are awaiting the upcoming Fed meeting, which has resulted in a lack of clear market direction.
If buyers of XAU/USD are able to regain control at the $2,400 level, it has the potential to propel prices beyond the significant psychological barrier of $2,450. If the level above is broken, it will reveal the record peak (ATH) at approximately $2,483, followed by the $2,500 threshold.
If XAU/USD continues its downward trend and falls below the 50-day moving average (DMA) at $2,358, there is a possibility of additional losses. The upcoming level of support can be found at the daily low of $2,353 recorded on July 25. After eliminating those levels, the next point to consider would be the 100-DMA at $2,326 before potentially dropping down to the $2,300 level.