Gold Struggles to Break Above $1,786 – Hawkish Fed Forecasts in Play
With the current rally to $1,786 early Tuesday morning in Europe, gold is struggling to overcome daily losses. The metal’s corrective drop could be attributed to cautious market optimism and recently low rates. However, the Fed’s hawkish outlook and a cautious mood ahead of Wednesday’s U.S. Consumer Price Index (CPI) appear to pose a challenge to yellow metal buyers of late.
The current slight optimism in the market could be attributed to the positive vehicle sales figures in China in July. According to the China Automobile Manufacturers Association, the dragon nation increased passenger car sales 20.1 percent year-on-year in July. However, given Beijing’s position as one of the world’s top buyers of gold, the news had a double impact on the XAU/USD price.
Additionally, 10-year US Treasury rates are unchanged at around 2.75% after falling around seven basis points (bps) on Monday and rising 14 bps on Friday. The same challenges the US dollar index (DXY) ahead of the second quarter of non-farm productivity and US unit labor costs (Q2). Forecasts indicate that non-farm productivity in the United States will increase to -4.6% from -7.3% previously, while unit labor costs will fall to 9.5% from 12.6%.
However, around 70% of fed funds futures forecast a 75 basis point rate hike in September, joining Friday’s strong US jobs report and hawkish Fedspeak in challenging gold buyers. In the same vein, the US-China dispute over Taiwan and the global economic slowdown. Following mixed performance on Wall Street, the S&P 500 Futures print minor gains around 4,150 at press time.
Given the availability of second-tier US employment numbers, gold XAU/USD the price may remain disappointing ahead of the report. However, the US CPI and the aforementioned risk factors will be given special attention for unambiguous guidance.
Gold Technical Outlook
The price of gold has stopped falling at the rising channel support line on the chart, and the EMA50 has reached that level to give it strength, while the stochastic is now clearly positive.
As a result, we think the odds are good that the projected uptrend will restart over the next period, with the first key target at 1802.80 reminding you that a continuation of the uptrend depends on price stability at the table. above 1755.70.
Today’s trading range is likely between 1760.00 support and 1795.00 resistance.
Expected Trend Today: Bullish