Gold futures ended the last trading week flat below the $1800 level, as the yellow metal recorded a weekly loss. After it crossed the $1800 resistance earlier this month, XAU/USD gold prices struggled to maintain the momentum created by the dollar's rally and the US central bank's monetary tightening path. Gold's losses last week brought it to the level of 1745 countries for an ounce, the lowest in three weeks. The XAU/USD gold market suffered a weekly decline of 3.2%, adding to its year-to-date 2022 loss of around 4%. In the same way, the price of silver, the sister commodity to gold, fell to less than $ 19 an ounce, so the white metal recorded a weekly loss of about 9%, bringing silver closer to a bear market.
The precious metals market was affected by the strong dollar and the rise in Treasury yields.
The US Dollar Index (DXY), which measures the performance of the US currency against a basket of major currencies, rose to 108.09, from an opening at 107.48. The index enjoyed a weekly rise of 2.32%, adding to its rise in 2022 by 12.63%. A strong US currency gain is bad for dollar-priced commodities because it makes them more expensive to buy for foreign investors. Commenting on the performance. “The rise of the US currency has taken a heavy toll on the yellow metal, which was already seeing profit-taking after hitting $1,800,” said Craig Erlam, chief market analyst at OANDA, in a note.
Additional Factors Affecting Gold
US Treasury yields rose overall, with the benchmark 10-year bond yield rising 9.4 basis points to 2.974%. One-year yields rose 2.8 basis points to 3.256%, while 30-year yields jumped 7.2 basis points to 3.21%. The spread between the two-year and 10-year returns narrowed to about -30 basis points. The spread widened to as much as -45 basis points this week.
The gold market in general is sensitive to the high interest rate environment as it raises the opportunity cost of holding non-yielding bullion.
In other metals markets, copper futures rose to $3.6675 a pound. Platinum futures fell to $889.00 an ounce. Palladium futures fell to $2,127.50 an ounce.
Gold is headed for its first weekly drop in five as investors weigh mixed signals from Fed officials on the scale of the next rate hike and the dollar's strengthening. The price of bullion fell to a three-week low amid an ongoing debate over whether the Federal Reserve will switch to smaller rate hikes. Policy makers offered differing views, with James Bullard of St. Louis urging a move by another 75 basis points while Esther George of Kansas City took a more cautious tone, saying that the case for higher US interest rates remains strong but the pace is up for debate.
- Higher interest rates usually dampen interest-free gold's allure, though bullion recovered from a nearly 16-month low in July on bets that the Fed will be less aggressive with increases as the US economy faces headwinds.
- The minutes of the central bank's July meeting, which were released last Wednesday, showed that officials agreed on the need to reduce the pace of interest rate increases at some point.
Economic Data
The latest data indicated that the US labor market remains healthy, with unemployment claims falling for the first time in three weeks. This will likely leave the door open for the Fed to continue walking aggressively, although new monthly readings on inflation and employment ahead of the September meeting may influence the decision. Commenting on this, Commerzbank AG analysts said in a note: “The prospect of further monetary tightening and a firmer US dollar through at least the end of the year continues to weigh on the direction of gold prices.” This week could send new signals in this regard.”
Today's XAU/USD Gold Price Forecast:
On the daily chart below, the price of XAU/USD gold is still in a bearish correction range. It is breaking the support level of $1,740 an ounce and will push the technical indicators towards oversold levels and enable it and from below to think about buying gold. Despite the tendency of global central banks to further tighten monetary policy, led by the US, the gold market is receiving impetus from increasing global geopolitical tensions. I still prefer buying gold from every bearish level. On the other hand, the bulls will not regain control of the trend without moving the gold price towards the psychological resistance level of 1800 dollars an ounce again.
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