The Gold price finds itself in a precarious position as it languishes near the depths of a six-day low around $1,925. A momentary respite in the United States Dollar (USD) rally before the unveiling of influential economic data from the US has temporarily halted its four-day descent.
Let’s shift our focus to the sizzling factors at play—oil prices, US Treasury bond yields, and ISM PMI. The relentless strength of the US Dollar, coupled with soaring US Treasury bond yields, remains the sinister force tethering the Gold price this week. After a lackluster Monday of trade due to a holiday-induced lull, the US Dollar bulls gained newfound vigor as risk aversion set in, fueled by resurfacing anxieties about global growth.
Rumblings of slowdown concerns in China’s property markets and whispers of a looming recession sent shockwaves through the economy, especially with the surging oil prices stealing the limelight. Russia and Saudi Arabia added fuel to the fire by extending voluntary oil supply cuts, propelling oil prices to lofty 10-month highs. Inflation fears further fueled the flames as expectations grew that central banks might be compelled to tighten their policies, risking a global economic downturn.
To exacerbate the already precarious situation, downward revisions in business activity data from the Eurozone and the UK, coupled with sluggish growth in China’s services sector and disappointing Factor Orders data from the United States, cast a gloomy shadow over the global economic landscape. An exodus towards the safe haven of the US Dollar ensued, triggering a relentless assault on the Gold price, eventually driving it to its six-day nadir at $1,924.
Curiously, the US Dollar chose to disregard the dovish remarks made by US Federal Reserve (Fed) Governor Christopher Waller. Waller, in an apparent moment of candor, stated on Tuesday that the recent positive flow of US data would provide the Fed with ample time to assess whether any further interest rate hikes were necessary. He concluded that there was no immediate need for a surge in short-term borrowing costs.
The spotlight now shifts to the eagerly awaited US ISM Services PMI data, scheduled for release in the North American session on Wednesday. In conjunction, the final S&P Services PMI and Good Trade Balance data will captivate Gold traders’ attention. Additionally, a keen eye shall be kept on oil price dynamics, as they possess the power to sway market sentiment and shape the trajectory of US Treasury bond yields. On Tuesday, the Gold price ruptured the range trade bracketed between the crucial 100-day Moving Average (DMA) at $1,952 and the mildly bullish 50 DMA at $1,932, descending below the latter to close the day.
The next significant support lies at the $1,916 level, where the 21 and 200 DMA converge, forming an ominous junction. The bearish undertones persist for the Gold price, as the 21 and 200 DMAs stubbornly maintain their bearish cross.
To add to the unfolding saga, the 14-day Relative Strength Index (RSI) has breached the midpoint, tilting the balance in favor of Gold sellers. Should the decline continue, the prior week’s low of $1,904 looms on the horizon.
As for an alternative scenario, the Gold price must recapture the 50 DMA turned resistance at $1,932 on a daily closing basis to embark on a journey towards conquering the 100 DMA obstacle at $1,952. Defying the odds, further resistance awaits at the firm thresholds of $1,970 and the pinnacle of July 27, when Gold reached a zenith of $1,982.