The price of GOLD is facing difficulties in capitalizing on a modest overnight rebound near the $1,900 level, as it remains defensive during the Asian
The price of GOLD is facing difficulties in capitalizing on a modest overnight rebound near the $1,900 level, as it remains defensive during the Asian session on Friday. Currently trading around the $1,910 area, the XAU/USD pair shows minimal change for the day and appears susceptible to a continued downtrend that has persisted for over two months since reaching its all-time high in May.
Hawkish expectations from the Federal Reserve pose a headwind for gold, as investors anticipate another 25 basis points interest rate hike at the upcoming policy meeting scheduled for July 25-26. These expectations gained further strength following the release of data by Automatic Data Processing (ADP), which showed a significant increase of nearly 500,000 jobs in the US private sector for June. This exceeded estimates by a wide margin and marked the largest one-month increase since February 2022. Additionally, the Institute of Supply Management (ISM) Non-Manufacturing Purchasing Managers’ Index (PMI) rose from 50.3 to 53.9 in June, surpassing expectations of 51.
Despite data revealing higher than anticipated weekly initial jobless claims and lower JOLTS job openings for May, the overall resilience of the US economy supports the case for further tightening of monetary policy by the Federal Reserve. This has led to a rise in US Treasury bond yields and acted as a catalyst for the US Dollar’s strength, weighing on the US Dollar-denominated gold price. However, market participants have adopted a cautious stance ahead of the release of the Nonfarm Payrolls (NFP) report during the North American session, as it is expected to influence expectations of the Fed’s rate-hike trajectory and subsequently impact the demand for the US Dollar and gold.
In terms of technical analysis, immediate support for GOLD is seen near the overnight swing low just above the $1,900 level, followed by the $1,893-$1,892 region or the multi-month low. A significant breach below the latter could expose the price to further downward pressure towards the crucial 200-day Simple Moving Average (SMA) around the $1,865-$1,864 region.
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