With USD demand picking up, there is fresh selling pressure on gold. Hawkish Fed predictions and high US bond rates support the US dollar.
Fears of a recession strengthen the safe-haven XAU/USD and aid in containing losses. The price of gold struggles to build on the day before’s a slight recovery from the $1,807-$1,806 range, or the YTD low, and runs into the new supply on Tuesday. The XAU/USD currency pair has been trading low during the early European session and is barely over the $1,810 mark, down about 0.30% daily.
The US Dollar (USD) is again in demand after a slight decline from a seven-week high on Monday due to anticipation of additional Federal Reserve policy tightening (Fed). This is a significant factor pushing the price of gold expressed in US dollars lower. Now that inflation has remained persistently high, the markets are persuaded that the Fed will maintain its aggressive posture.
The United States Personal Consumption Expenditure (PCE) Price Index, which showed that inflation isn’t declining as quickly as anticipated, helped to increase the bets. Several Fed members also emphasized boosting interest rates to lower inflation. This keeps encouraging the high US Treasury bond rates and diverts more money away from the non-yielding Gold price.
Yet, investors continue to be concerned about economic headwinds brought on by quickly increasing borrowing prices. The overnight positive movement in the stock markets is restrained by this and geopolitical issues, which also provides some support for the safe-haven Gold price. As a result, it is prudent to exercise care before laying new negative wagers on the XAU/USD and setting up for a further decline.
However, the likelihood of future Fed policy tightening should keep the Greenback strong and work in the bears’ favor for the XAU/USD pair. The price of gold is ready to drop below $1,800 and test the support of the 100-day Simple Moving Average (SMA), now around $1,792. This should serve as a turning point that, if firmly breached, will pave the way for more significant losses.
