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Gold Price Struggles to Clear $2,400 and Retreats on Firm US Dollar

Gold prices fell from a daily high of $2,403 to $2,377 on Monday, as the US dollar gained 0.20%. The greenback’s strength came as investors prepared for the Federal Open Market Committee (FOMC) monetary policy decision, which begins on July 30 and concludes the following day with a statement release and a press conference by Federal Reserve Chair Jerome Powell. The XAU/USD pair currently trades at $2,377 after hitting its daily peak of $2,403.

Market Sentiment and Economic Factors

Wall Street’s slightly upbeat market sentiment and a robust US dollar continue to exert pressure on gold prices. Reports indicate that gold consumer demand in Asia has been dampened by high retail prices and ongoing economic concerns in China. Geopolitical risks, such as Hezbollah’s rocket strike on Israel, which threatens to escalate conflict in the Middle East, have, however, helped cap gold’s losses.

Upcoming US Economic Data

Traders are closely monitoring the release of critical US economic data this week. The JOLTS Job Openings report, ADP Employment Change data, and the FOMC’s decision are highly anticipated. While the Federal Reserve is expected to maintain current interest rates, market participants believe the central bank may signal the beginning of an easing cycle. According to the CME FedWatch Tool, traders have priced in a 100% chance of a quarter-percentage interest rate cut at the September meeting.

Forex.com’s market analyst, Fawad Razaqzada, commented, “If the Fed confirms a dovish stance, predictions could escalate to potentially three cuts before the end of the year.

Key Economic Indicators

The week will conclude with the release of the Institute for Supply Management (ISM) Manufacturing PMI and the Nonfarm Payrolls report for July. Recent US inflation data indicated progress towards the 2% target, though inflation appears more persistent than expected, as June’s Core PCE figures exceeded estimates.

Other Central Bank Decisions

Alongside the Fed’s decision, monetary policy decisions from the Bank of Japan (BoJ) and the Bank of England (BoE) are also in focus. The BoJ, unique among the major G7 central banks, is expected to raise rates by 15 basis points at its upcoming meeting, while the BoE is anticipated to begin its easing cycle on August 1.

Data from the Chicago Board of Trade (CBOT) suggests that traders are pricing in 54 basis points of easing by the end of the year, as indicated by the December 2024 fed funds rate futures contract.

Technical Analysis

Gold prices exhibit an upward bias, despite forming a ‘bullish harami’ pattern, with buyers struggling to decisively clear the $2,400 level, exacerbating the drop towards the current spot price. Momentum indicators like the Relative Strength Index (RSI) show buyers taking a breather. The XAU/USD is consolidating around $2,370-$2,380 as traders prepare for the Fed’s meeting.

If XAU/USD buyers reclaim the $2,400 level, prices could potentially rise above the psychological $2,450 area. A breach of this level would expose the all-time high (ATH) around $2,483, followed by the $2,500 mark.

Conversely, if XAU/USD continues to edge lower and drops below the 50-day moving average (DMA) at $2,358, further losses are likely. The next support level would be the July 25 daily low of $2,353. Breaching these levels would then target the 100-DMA at $2,326, ahead of a potential decline to the $2,300 mark.

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