- Gold price struggles to take advantage of modest intraday rebound from new yearly low.
- Recession fears and risk aversion sentiment continue to lend some support to the yellow metal.
- The continuation of the recent strong dollar bull run acts as a headwind for XAU/USD.
The price of Gold (XAU/USD) has reversed an intraday decline to its lowest level since August 2021, although it seems to have difficulties to capitalize on the recovery attempt. XAU/USD oscillates between tepid gains and small losses during the first part of the European session and now seems to have stabilized around the $1,735 area.
The prolonged selling on the stock marketsamid the persistent fears about a possible global recession, turned out to be a key factor offering some support to the precious metal as a safe haven. However, the incessant buying around the US dollarbolstered by aggressive Fed expectations, acted as a headwind and capped any significant rise in dollar-denominated gold.
In fact, the dollar index soared to a new two-decade high and continued to be supported by the rising acceptance that the Fed would maintain its aggressive tightening policy to curb rising inflation. Expectations were bolstered by FOMC meeting minutes released last week, which indicate that another rate hike of 50 or 75 basis points is likely at the next FOMC meeting in July.
Policy makers also stressed the need to fight inflation, even if this translates into an economic slowdown. Therefore, the market will remain attentive to the latest figures for consumer CPI inflation in the US, which will be published on Wednesday. The CPI report will play a key role in influencing the Fed’s monetary policy outlook and help determine the next directional move for non-yielding gold.
Meanwhile, a worsening global economic outlook and a further decline in US Treasury yields, fueled by the flight to safety, could continue to lend some support to gold prices. Apart from this, the dollar’s price dynamics could create some short-term opportunities amid the absence of relevant economic releases in the market.
gold technical levels
Source: Fx Street
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