- Gold prices have been under pressure towards a key support line since late July during a three-day decline.
- Recession woes, firm US data underpin hawkish Fed bets and a strong US dollar.
- China trade numbers, FedSpeak key to fresh clues.
The price of gold (XAU/USD) remained at around $1,695 while charting a three-day decline in Wednesday’s Asian session. The precious metal supported firm US dollar strength amid a risk-off mood and higher yields. Hawkish Fed bets put pessimistic pressure on silver ahead of several speeches from Fed policymakers, including Chairman Jerome Powell.
The US dollar index (DXY) held steady at a 20-year high, up 0.22% intraday near 110.50 last, as robust US data joined growing calls for the Fed’s aggressiveness in September.
The US ISM services PMI rose to 56.9 vs. 55.1 market forecast and 56.7 ahead. However, the S&P Global Composite PMI and Services PMI eased to 44.6 and 43.7 respectively against initial forecasts of 45.0 and 44.1 respectively. Even so, the US dollar index (DXY) rose after the release and refreshed a 20-year high. It should be noted that CME’s FedWatch tool signals a 72.0% chance of a Fed rate hike of 50 basis points (bps), up from 57% in September and a day earlier.
Additionally, the energy crisis and China’s Covid woes will weigh on XAU/USD prices as traders await key data/events for the week, namely the European Central Bank (ECB) monetary policy meeting and Fed Chair Powell’s speech.
Drawing on the mood, Wall Street closed in the red while the 10-year US Treasury yield jumped the most in a month to hit the highest level since mid-June. It is worth noting that the S&P 500 futures posted modest losses.
China’s monthly trade numbers dictate short-term gold price movements ahead of Fedspeak. Above all else, fears of an economic downturn weigh on XAU/USD.
Gold price extended the previous day’s pullback from the 10-DMA and extended the three-week-old resistance line between bearish MACD signals.
With this, XAU/USD sellers are poised to break the upward sloping support line from late July around $1688.
A yearly low near $1680 could provide an interim stop during the metal’s decline, targeting multiple lows identified during 2021 around $1677.
Alternatively, the 10-DMA and the aforementioned resistance line, around $1,718 and $1722, respectively, will block the short-term rise in gold prices.
Gold: Daily Chart
Trend: Further weakness is expected