Gold price falls for the second day in a row, closing in on the monthly low.
On Wednesday, the gold price remained under some selling pressure for the second consecutive day. Hovering near the monthly low reached the previous day. During the Asian session, the XAUUSD trades around the $1,910 level. Appearing prepared to extend the current decline from the $1,953 region, or a one-month top, established on September 1.
The appearance of some US Dollar buying forces flows away from gold.
Following Tuesday’s performance, the US Dollar (USD) attracted new buyers. Excellent two-way price fluctuations and is viewed as a significant element eroding demand for gold. Expectations that the Federal Reserve (Fed) would maintain its aggressive attitude support rising US Treasury bond rates. And act as a tailwind for the US dollar. Market players are optimistic that the Fed will maintain interest rates higher for longer. And have priced in another 25 basis point (bps) hike by the end of this year.
The looming recession risk helps limit the XAUUSD losses ahead of the US CPI data.
The important US Consumer Price Index (CPI) will affect assumptions about the Fed’s future rate-hike course and offer new directional impetus to the non-yielding Gold price.
The bullish US macro data reported this week, which indicated to a healthy economy, confirmed the bets. Furthermore, the fact that inflation is not dropping quickly enough boosts the Fed’s chances for continued policy tightening. As a result, the market focus persists. The focus will be on the US consumer inflation statistics, which will be released later in the early North American session.
Any evidence of sticky inflation might lay the ground for the USD to resume its current rise to a six-month high, paving the door for the gold price to fall further. However, a generally milder risk tone may deter bears from initiating new wagers on the safe-haven XAU/USD. Concerns about China’s deteriorating economic situation continue to weigh on market mood. Worries about headwinds from fast rising borrowing prices add to the mix. Investors’ willingness to invest in risky assets.
Nonetheless, the aforementioned fundamental backdrop appears to be heavily weighted in favor of bearish traders, implying that the path of least resistance for the Gold price is to the downside. Furthermore, the overnight drop and closing below a theoretically crucial 200-day Simple Moving Average (SMA) support the XAUUSD’s bearish view. As a result, any good reaction to US macro data may still be viewed as a selling opportunity and may fizzle out fast.
