- Gold prices hit near seven-week low as bears attack near-term support amid oversold RSI.
- Yields extend south-run, US dollar regains upside momentum as fears of economic slowdown intensify.
- Updates around US ISM Manufacturing PMI, inflation, recession will be important.
Gold prices (XAU/USD) remained on a slippery footing as they slipped to their lowest level since early May at around $1,797 as of press time early Friday morning in Europe. In doing so, the yellow metal fell for a fifth straight day amid fears of inflation and an economic slowdown.
The risk-off mood takes cues from the recent supply crunch and alliance prices, mainly due to the Russia-Ukraine crisis and China’s Covid resurgence.
Sour sentiment directs markets toward the US dollar and bond-buying, which sinks gold prices. That said, the US Dollar Index (DXY) took bids to retrace the previous day’s pullback from a two-week high as market sentiment worsened on growth fears. The DXY reversed a two-day high from a 12-day high to close at 104.75 near 104.80 by Thursday’s close.
On Thursday, downbeat US personal spending and softer prints from the Fed’s preferred inflation gauge raised concerns over the health of the world’s largest economy and sank the US dollar. The greenback’s earlier retreat could be linked to a downbeat in US Treasury yields as benchmark 10-year bond coupons fell below 3.0%, before recovering to 3.01% at the close, to depict a decline of around 50 basis points (bps) since June. the peak
Portraying the mood, S&P 500 futures fell 0.80% to mark a five-day low while US 10-year Treasury rebounded to reverse the early Asian session to 2.967%, refreshing a three-week low.
Going forward, risk catalysts are key for gold traders to watch, with an eye on the US ISM Manufacturing PMI in June, 55.0 vs. 56.1 previously expected, as well as risk catalysts, for fresh stimulus. Also important are early readings of the Eurozone’s main inflation gauge, the Harmonized Index of Consumer Prices (HICP), for June.
Also Read: ISM Manufacturing PMI Preview: High Inflation Factor Steals Show, Dollar Boosts
Gold prices remained on the back foot after breaking the one-month-old horizontal support around $1,807. Adding strength to the bearish bias is a downside break of the $1,800 threshold.
That said, a southern run towards $1,786 is imminent before the bears target a month-old descending support line near $1,775.
Meanwhile, a corrective pullback validation from $1,807 support-turned resistance is needed to target the three-week-old descending trend line, $1,825 by press time.
Gold: Four-hour chart
Outlook: Further weakness is expected