On the opening day of a new week, the Gold struggles to establish a traction.
The gold price begins the new week on a sour note. Oscillating in a narrow trading zone slightly over $1,950 during the Asian session. The range-bound price action may still be classified as a positive consolidation phase. And it is prudent to exercise care before preparing for any substantial corrective slide from a one-month high reached on Friday.
Friday’s positive US data supports the US Dollar and limits the metal’s upward potential.
The fact that consumer confidence in the United States (US) has reached its highest level since September 2021 helps the USD. The dollar (USD) is expected to remain above its lowest level since April 2022, serving as a headwind for the gold market.
Indeed, the preliminary University of Michigan (UoM) Consumer Confidence Index outperformed even the most optimistic forecasts, reaching 72.6 in July, the highest level since September 2021. According to the report’s further findings, inflation forecasts for the coming year have risen to 3.4% from 3.3% in June. This was still lower than the peak of 5.4% in April 2022.
Bets on the Fed ending its rate-hiking cycle soon to assist minimize corrective drop.
This follows the release of the most recent US CPI report, which indicated continued stabilization in consumer prices. Furthermore, in June, the US PPI saw its weakest annual increase in nearly three years. This, Beliefs that the Federal Reserve (Fed) is nearing the conclusion of its policy tightening cycle rise in tandem with indicators that the US labor market is weakening.
Investors appear to be confident that the Fed would keep interest rates unchanged following the predicted 25 basis point (bps) increase in July. As a result, the USD is unable to profit on Friday’s tiny recovery from its lowest level since April 2022, and the non-yielding Gold price should benefit.
Aside from that, a little decline in US equities futures might function as a tailwind for the safe-haven precious metal, limiting the downside for the time being. Market investors are now looking forward to the Chinese macro data dump, which may have an impact on the risk mood and give the gold price a boost.
Meanwhile, the aforementioned fundamental background implies that the XAUUSD’s path of least resistance is to the upward. As a result, any downturn may still be viewed as a purchasing opportunity and is more likely to be cushioned, at least for the time being.
