Gold Reclaims $1,700 Mark – Eyes on US Interest Rate Decision
Gold traded bullish for the second day in a row after falling to a new multi-month year low on Thursday, at $1681, before rebounding quickly and reaching a weekly high of $1720.24. Nonetheless, GOLD extended its gains on Friday, getting a new weekly high of $1739.27, but failed to retake the critical $1750 mark, opening the door to a drop to present levels. Currently, the price of XAU/USD is $1723.62.
Just two hours after the New York ringing bell, sentiment began to deteriorate. Earnings miss by US firms and weaker-than-expected US PMI data have revived investors’ recession fears. As a result, the dollar soared, Treasuries rose, and rates fell, with the 10-year Treasury note yielding 2.792 percent, down eight basis points.
S&P Global released global PMIs on Friday, indicating that the global economy is slowing. The Eurozone and US readings were particularly bleak, raising the prospect of a recession. In July, the EU S&P Global Manufacturing and Composite PMIs fell to 49.6 and 49.4, respectively. In the case of the United States, the Services and Composite Indices were the main culprits, sliding to 47 and 47.6, respectively. Nonetheless, traders seeking shelter drove gold prices to a weekly high above $1740.
“The early PMI statistics for July suggest a concerning economic downturn,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, of US data. Excluding pandemic lockdown months, the output is decreasing at a rate not seen since 2009 during the global financial crisis, with survey data indicating an annualized rate of around 1%.”
As a result, the yield curve inversion in the US 2s-10s has been negative for 14 days and now stands at -0.211 percent, while the US 3-month to 10-year gap has flattened to 0.337 percent.
The US Federal Reserve is anticipated to hike rates by 75 basis points (bps) this week, raising the Federal funds rate (FFR) to 2.50 percent. However, gold traders should be mindful that the July meeting will not include any economic estimates, which will be revealed at the September meeting.
Gold Technical Outlook
Gold price is showing new positive trades as it approaches the 1726.60 level, with a break of this level extending the correcting bullish wave to 1755.70 as the next objective. This implies a bullish trend for today until it breaks and holds below 1704.60.
Today’s trading range is anticipated to be between 1700.00 support and 1735.00 resistance.
Today’s projected trend: bullish
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