This Wednesday, the gold price is hovering around $1,940, nursing its wounds after a lengthy drop. All eyes are now on US Federal Reserve (Fed) Chair Jerome Powell’s speech. Which comes amid increased hawkish rate hike expectations and good US economic statistics.
Weak economic data from the United States China’s gold demand is significant.
On Tuesday, gold price extended its three-day losing streak. And nearly touched the two-month bottom of $1,925, having faced a double whammy from optimistic US economic data. On one side and heightened hawkish Fed predictions on the other. Chinese demand is slowing. On the other hand, the price of gold has also contributed to its decline.
According to Census Bureau data issued Tuesday, housing starts. In the United States increased 21.7% from April, compared to a 0.8% reduction projected. Building permits increased 5.2% in May, compared to the revised April rate of -1.4% . And the predicted 5.0% increase. Positive US economic statistics eased concerns about a slowing economy and raised hopes for two more Fed rate hikes in the second half of this year. As forecasted by the Fed’s Dot Plot chart last week. Markets now price in a 78% chance of a Fed rate hike next month. Signs of economic strength in the United States offered further legs to the US Dollar’s recovery. Impacting negatively. on the non-interest-bearing Gold.
On the Chinese side of the story, retail sales of gold and silver jewelry appear to have peaked. Climbing 24% year on year in May to 26.6 billion yuan ($3.7 billion). This is slower than the previous two months’ growth rates of 44% and 37%. According to Bloomberg, using the most recent statistics from China’s National Statistics Bureau (NBS).
Despite a dramatic drop in US Treasury bond yields, the gold market remains vulnerable.
Gold sellers, on the other hand, found support near $1,930. As a result of a strong drop in US Treasury bond yields across the curve. On Tuesday, risk-off flows prevailed in the face of heightened. US-Sino tensions and nervousness ahead of Fed Chair Powell’s testimony. Which bolstered safe-haven demand for US government bonds, resulting in a sharp decline in the US dollar. Treasury bond yields vary across the yield curve.
Gold is down so far this Wednesday as traders await Fed Chair Jerome Powell’s appearance before the House Financial Services Committee on the Semi-Annual Monetary Policy Report for new trading momentum. Because the Fed’s Monetary Policy Report was previously released last Friday, the attention will be on Powell’s Q&A session. Powell’s hints at additional rate hikes, as well as his assessment of tightening lending conditions, will be heavily scrutinized. Aside from Powell, some of his colleagues will take the rostrum, making it a busy day for American trading despite a paucity of high-impact US data releases.
The United Kingdom’s Consumer Price Index (CPI) inflation data, which comes just a day before the Bank of England’s release, will also be scrutinized. Interest rate decision by the Bank of England. The data could assist markets reprice the Bank of England’s rate hike forecasts, influencing risk sentiment and, as a result, US Dollar valuations.
Gold Technical analysis
Gold price finally broke its one-month-old range to the south after closing Tuesday below the crucial 100-Daily Moving Average (DMA) at $1,943.
The 14-day Relative Strength Index (RSI) is comfortably below the midline, indicating that the bearish potential is intact.
The previous day’s low of $1,930 is considered as immediate support, below which the two-month low of $1,925 will be challenged. A sustained break below the latter will trigger a new decline towards the March 17 low of $1,918.
Any rebound attempts, on the other hand, will be met with quick failure. $1,943 represents resistance at the 100 DMA. Further up, a daily close above the 21 DMA support-turned-resistance at $1,953 is needed for kicking off a long-term rebound towards the previous week’s high of $1,971.
