- Gold price remains pressured near monthly lows amid firmer US Treasury yields.
- US dollar remains on the back foot amid a mixed market mood, ahead of critical data.
- XAU/USD’s path of least resistance appears down, with eyes on $1,712 and $1,700.
Gold price is nursing losses near the monthly lows of $1,720, replicating the similar price action seen in Tuesday’s Asian trading. Despite the broad weakness in the US dollar, the bright metal remains on the defensive, as the Treasury yields cling to the previous upside amid increased bets of a 75 bps September rate hike in September. Markets wager a 70% probability of an outsized Fed rate hike next month, the latest CME Group’s FedWatch Tool shows. Strong US Consumer Confidence and JOLTS job openings data released Tuesday also helped ramp up aggressive Fed tightening bets. Expectations of higher borrowing costs continue to weigh on global stocks, although the US S&P 500 futures gain 0.40% so far, exerting downside pressure on the greenback. Of
The non-interest-bearing yellow metal also remains weighed down by hopes that the ECB will also go in for a 75 bps rate hike as early as next week, as the Eurozone battles a record high inflation rate. Germany, Europe’s economic powerhouse, saw its inflation rate accelerating to a 40-year high of 8.8% in the year to August, bolstering expectations of another all-time-high inflation in the old continent. The Eurozone inflation (HICP) data will be released at 09:00 GMT later this Wednesday, with economists predicting a 9.0% YoY print. The bullion could come under renewed selling pressure if the inflation figures boost calls for the 75 bps September ECB hike. Top ECB policymakers continue to back the view that aggressive tightening needs to be considered to control raging inflation, even if it is at the cost of the economy.
Meanwhile, on the US docket, the critical ADP Employment Change report will be published after a two-month break, which could likely drive the next leg higher in the buck. An upside surprise in the ADP numbers cannot be ruled out, given the lower estimates at +200K in August. Gold’s next price direction, therefore, remains south against a backdrop of higher rates and upbeat US data.
Gold price technical outlook: Daily chart
Nothing seems to have changed technically for Gold price, as it remains exposed to additional downside risks after confirmation of a downside break from the rising trendline resistance, now at $1,743.
The 14-day Relative Strength Index (RSI) keeps pointing south towards the oversold region while below the midline. Sellers need a sustained move below monthly lows of $1,720 on their way towards the July 27 low of $1,712. The next significant downside target is seen at the $1,700 level.
On the flip side, any recovery attempts will meet initial resistance at $1,730 round figure. Bulls will need to find a strong foothold above the abovementioned rising trendline support turned resistance at $1,743.
The $1,750 psychological level will be next on buyers’ radars, opening doors for a test of Friday’s high of $1,759, around where the bearish 50-Daily Moving Average (DMA) appears.