The gold price is trading on a flatline just above the psychological level of $1,950 early Monday. As traders assess the US Federal Reserve (Fed) rate hike possibilities amid a holiday-thinned market in the United States.
The US dollar is showing indications of life, while the gold price is dormant.
Despite a significant decrease in the US Dollar over the week, gold price is trading listlessly in Monday’s Asian market so far. Gold purchasers remain wary in the face of a lackluster recovery in the US. The dollar has recovered from monthly lows among its key competitors. And its downside appears to be limited by a drop in US Treasury bond yields.
The prevailing risk-off market profile is supporting the US Dollar’s rebound. But China growth concerns have resurfaced after many major global banks cut China’s GDP projections, with Goldman Sachs stating. That “the stimulus seen is insufficient to fire up a powerful enough impulse for growth.”
The cautious market tone is increasing demand for US government bonds. At the expense of US Treasury bond yields, keeping the gold price cushioned so far. However, if risk aversion gains traction, exacerbated by holiday-thin trade. Gold prices are expected to continue Friday’s retreat from near $1,970.
Furthermore, the expectations around the Federal Reserve’s interest rate outlook and repositioning. Ahead of Chairman Jerome Powell’s testimony could influence US Dollar valuations in the future. Influencing the direction of gold prices. Meanwhile, gold prices are expected to remain in the $1,950-$1,950 area.
On Friday, gold prices recovered early gains and settled modestly flat. Aided by a good recovery in US Treasury yields as well as the US Dollar, following aggressive comments from Federal Reserve policymakers, the first since the Fed’s ‘blackout period’ ended.
Thomas Barkin, President of the Richmond Federal Reserve, stated. That he was “comfortable” with further rate rises because inflation was not yet on an evident path back to 2%. Meanwhile, Federal Reserve Governor Christopher Waller stated at an event that “Inflation is just not moving,” said an economist at a conference in Norway, “and that’s going to require, probably, some more tightening to try to get that going down.” Furthermore, the Fed stated in its most recent monetary policy report to Congress. That inflation in key sectors of the US service economy “remains elevated and has not shown signs of easing.”
Markets presently price in a 72% chance of a July Fed rate hike, saving the day for US Dollar bulls. For a new direction on the gold market, gold traders will keep an eye on Fed speak, China stimulus predictions, and the first top-tier US economic data on Friday, the S&P Global Manufacturing and Services PMIs.
Technical analysis
According to the daily chart, the gold price For the first time since May 15, the price of gold completed the week above the important bearish 21-Daily Moving Average (DMA) at $1,957.
However, gold purchasers remain skeptical, as the 14-day Relative Strength Index (RSI) remains below the midline.
As a result, failing to maintain above the 21 DMA resistance-turned-support will pave the way for a test of the formidable horizontal 100 DMA support at $1,942.
Prior to that, the psychological threshold of $1,950 may provide some relief to gold purchasers. A prolonged move below the 100 DMA will put Thursday’s low of $1,925 in jeopardy.
On the other hand, gold must remain above the 21 DMA in order to launch a new rebound towards the previous week’s high of $1,971. The mildly bearish 50 DMA at $1,985 is farther up. will enter the picture.
To summaries, the gold price requires a major catalyst to break out of the one-month-old range; until then, the gold price is likely to oscillate between the 50 and 100 DMAs.
