Asset Watch
Tuesday, July 04, 2023
• Markets to keep or pause pricing in further US rate hikes
• Gold price Bearish momentum loses steam
The Gold price retreated last week as many investors believe that the Fed would resume its rate hike cycle in the upcoming meeting of July. Markets have already priced in a 25-basis point rate hike based on the Fed chair statements about high inflation rates in the US and the need to take further steps to bringing the inflation numbers back to their target at 2%.
Investors will be waiting for the FOMC minutes this week to find out more about the reasons that made the committee members think that they may hike rate by 50 basis points by the end of 2023. Additionally, markets await the US jobs report on Friday and expect the US economy to add 225K of jobs in June. Therefore, any lower-than-expected data means weaker inflationary pressures and lower chances of hiking rates above 5.50 % in 2023 (a negative scenario for the USD price and a positive one for the gold price). Whereas any higher-than-expected data could maintain high inflation levels and increase the odds for the Fed to hike rates towards 5.75% in 2023 (a negative scenario for the gold price and a positive one for the US dollar price).
Chart source: TradingView
In mid-June the yellow metal price resumed its downward trend as expected creating lower highs with lower lows. Last week, the price printed a multi month low at 1893/oz then rallied and closed on a Doji pattern (a reversal pattern that indicates trader’s reluctance to keep pushing in the same direction).
Currently, the gold price moves in the trading zone between 1911-1949 and it could correct higher if the rate breaks above the bearish trendline originating from the June 2 high at 1983. A daily close above the high end of the mentioned above trading zone could encourage traders to rally the price towards 1974 however, the resistance level located at 1960 should be considered.
On the other hand, a daily close below the low end of the trading zone may entice bears to retake the initiative and press towards 1872. That said, the support level residing at 1890 should be monitored.