Gold Price Consolidates Amid Uncertainty Over Fed Rate Hike Path

Gold started the week with a subdued tone, trading within a narrow range around $1,925 during the Asian session.

Arslan Butt•Monday, July 10, 2023•2 min read

GOLD started the week with a subdued tone, trading within a narrow range around $1,925 during the Asian session. The XAU/USD pair has been consolidating within a well-established range for the past three weeks, as traders exercise caution amid uncertainties surrounding the Federal Reserve’s future rate hike decisions.

Renewed demand for the US Dollar, fueled by robust wage growth and a slight decrease in the US unemployment rate, indicates persistent tightness in the labor market. This reinforces expectations that the Federal Reserve will resume raising interest rates at its upcoming policy meeting, leading to higher yields on US Treasury bonds.

Notably, the two-year US government bond yield is hovering near its highest level since June 2007, while the benchmark 10-year US Treasury yield remains above the 4.0% threshold. These factors have revived demand for the US Dollar, presenting a significant headwind for the price of Gold.

On the other hand, reduced bets on aggressive rate hikes find support for the XAU/USD pair. The recently released Nonfarm Payrolls report revealed the addition of 209,000 jobs to the US economy in June, marking the lowest figure in two and a half years and signaling a cooling job market. This development has the potential to soften the Federal Reserve’s hawkish stance and curb bullish bets on the US Dollar, thereby providing support to the price of GOLD . Additionally, concerns over a global economic downturn serve to limit a substantial decline in the safe-haven precious metal, at least for the time being. Traders are likely to proceed cautiously as they await the release of the latest US consumer inflation figures, scheduled for later this week.

Technical Analysis of Gold Price

In terms of technical analysis, the price of Gold faces a strong immediate resistance in the $1,933-$1,935 region, followed by the 100-day Simple Moving Average (SMA) around $1,948-$1,949. A sustained breakthrough above the SMA could initiate a short-covering rally, driving the GOLD price towards the $1,962-$1,964 area, and potentially testing the supply zone of $1,970-$1,972. If momentum continues, bulls may regain control and push the price beyond the psychological level of $2,000, challenging the resistance at $2,010-$2,012.

On the downside, immediate support lies around the $1,910 level, followed by the $1,900 mark and the multi-month low of $1,893-$1,892 reached in June. A convincing break below this range would expose the Gold price to further downward movement, with the next target being the crucial 200-day Simple Moving Average (SMA) around the $1,866-$1,865 zone. A breach of this level would signal a shift in sentiment among traders, indicating a bearish outlook for Gold.

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ABOUT THE AUTHOR See More

Arslan Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.