- Gold price struggles to gain any meaningful traction on the first day of a new week.
- Friday’s upbeat US data underpins the US Dollar and caps the upside for the metal.
- Bets that the Fed will soon end its rate-hiking cycle to help limit corrective decline.
Gold price kicks off the new week on a subdued note and oscillates in a narrow trading band, just above the $1,950 level through the Asian session. The range-bound price action might still be categorized as a bullish consolidation phase and warrants some caution before positioning for any meaningful corrective decline from a one-month peak touched on Friday.
The fact that consumer confidence in the United States (US) soared to the highest level since September 2021 assists the US Dollar (USD) to hold steady above its lowest level since April 2022, which, in turn, is seen acting as a headwind for the Gold price. In fact, the preliminary University of Michigan (UoM) Consumer Confidence Index surpassed even the most optimistic estimates and came in at 72.6 for July – the highest since September 2021. Additional details of the report showed that expectations for inflation over the next year edged higher to 3.4% from 3.3% in June. This, however, was still down from the high of 5.4% in April 2022.
This comes on the back of the latest US CPI report, which pointed to a further moderation in consumer prices. Furthermore, the US PPI recorded the smallest annual rise in nearly three years in June. This, along with signs that the US labor market is cooling, lifts bets that the Federal Reserve (Fed) is nearing the end of its policy tightening cycle. Investors now seem convinced that the Fed will hold interest rates steady after the expected 25 basis points (bps) lift-off in July. This, in turn, fails to assist the USD to capitalize on Friday’s modest recovery from its lowest level since April 2022 and should lend some support to the non-yielding Gold price.
Apart from this, a modest downtick in the US equity futures could act as a tailwind for the safe-haven precious metal and help limit the downside, at least for the time being. Market participants now look to the Chinese macro data dump, which might influence the risk sentiment and provide some impetus to the Gold price. The aforementioned fundamental backdrop, meanwhile, suggests that the path of least resistance for the XAU/USD is to the upside. Hence, any downfall might still be seen as a buying opportunity and is more likely to remain cushioned, at least for the time being.
Technical levels to watch
