Will Gold Turn Bullish After the Reversal Yesterday?
Gold dipped below $1,900 yesterday but made a quick comeback after that, erasing all losses, which is a bullish reversing signal
Gold has been bearish since it failed to make new record highs above $2,075 in early May and since then the price has been sliding lower. Yesterday Gold prices (XAU/USD) lacked direction during the European session, but it resumed the decline in the USS session and fell to its lowest level since March 15 following strong U.S. economic data, breaking below $1,900.
Although, not too long after that, Gold made a quick reversal, ignoring the data, and managed to erase its decline to trade slightly higher near $1,913. The economic calendar revealed impressive figures for the US economy. The Gross Domestic Product (GDP) for the first quarter was revised higher from 1.3% to 2.0%, indicating stronger growth than first estimated. Additionally, the jobs data showcased the robustness of the labor market. Initial Jobless Claims for the week ending June 24 came in at 239K, well below the estimated 265K, breaking a three-week streak of readings above 260K.
Following the release of positive economic data from the United States (US), the price of Gold took a $20 dive, which sent the price to around $1,893, but it recovered all of its losses after dipping below the $1,900 level for the first time since March. So, the price action in Gold showed resilience yesterday as speculations increased that the Federal Reserve (Fed) would proceed with additional rate hikes. Besides that, the data countered concerns of a “recession” and highlighted a strong pace of economic growth.
FED’s Jerome Powell said this week that a majority of policymakers anticipate the need for at least two more interest rate hikes by the end of 2023. This decision is driven by U.S. inflation remaining above the central bank’s 2% target and a labor market that remains highly competitive.
GOLD is often seen as a hedge against inflation. However, the prospect of rising interest rates diminishes the appeal of non-yielding assets like Gold. With the current expectations for interest rates, it is likely that Gold will end the quarter with negative performance, marking the first time since September 2022.
Gold XAU Live Chart
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