- Gold price remains pressured at monthly low, down for the fifth consecutive day.
- Recession fears, hawkish Fedspeak underpin US dollar strength amid sluggish session.
- Anxiety ahead of Jackson Hole, G20 chatters also weigh on XAU/USD prices.
Gold price (XAU/USD) takes offers to renew monthly low near $1,750 during early Friday morning in Europe. In doing so, the bullion prices register the five-day downtrend as the US dollar bulls cheer recession woes, as well as firmer US data and hopes of the Fed’s aggression vis-à-vis rate hikes.
US Dollar Index (DXY) rises to a four-week high of 107.72, up for the third consecutive day, around 107.68 by the press time, amid multiple catalysts ranging from hawkish comments from the Fed policymakers to upbeat data at home, as well as geopolitical fears surrounding China and Europe.
Recently, Bloomberg came out with the news that Chinese President Xi Jinping and Russian President Vladimir Putin plan to attend a Group of 20 Summit to be held in Bali later this year, Indonesian President Joko Widodo said in an interview. The news also mentioned that it was the first time the leader of the world’s fourth-most populous nation confirmed both of them were planning to show up at the November summit. The news adds to the market’s anxiety and fears of more drama, which in turn contributed to the flight to safety and helped the DXY to refresh the monthly high after the release.
Previously, San Francisco Fed President Mary Daly backed either 50 basis points or a 75 basis points hike while signaling the move for the September rate decision whereas Minneapolis Federal Reserve Neel Kashkari mentioned that, per Reuters, he does not believe the county is currently in a recession.
Elsewhere, the all-time hawk St. Louis Fed President James Bullard said he is leaning towards another 75 bps rate hike in September. “Trading in futures contracts tied to the Fed’s policy rate suggested investors see that rate rising to a range of 3.50%-3.75% by March of next year, but then starting to fall a few months later,” said Reuters. That said, the current range of the Fed’s benchmark rates is 2.25-2.50%.
The hawkish Fedspeak seems to have taken clues from the upbeat US Philadelphia Fed Manufacturing Survey and softer prints of the weekly Initial Jobless Claims of late.
Amid these plays, Wall Street closed mixed and exert down pressure on the S&P 500 Futures, down 0.17% intraday at the latest. Further, the US 10-year Treasury yields reverse the previous day’s retreat from the monthly high to 2.891% by the press time.
Looking forward, a light calendar can restrict XAU/USD moves but market fears and a firmer US dollar may keep bears happy ahead of the next week’s Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium.
A sustained downside trading below the 50-DMA and 21-DMA joins the first bearish MACD signals in a month to keep gold sellers hopeful of witnessing further declines in the XAU/USD.
However, the previous resistance line from April, around $1,731 by the press time, appears a tough nut to crack for the metal sellers.
Also acting as a downside filter is the $1,700 threshold and the yearly bottom surrounding $1,680.
Alternatively, recovery moves need to cross the aforementioned moving averages to regain the buyer’s confidence. That said, the 21-DMA hurdle of $1,765 restricts immediate upside ahead of the 50-DMA level near $1,775.
Following that, the $1,800 round figure and the monthly peak of $1,807 will be crucial for the gold buyers to retake control.
Gold: Daily chart
Trend: Further downside expected