At the beginning of this week’s trading, gold futures regained the top of the 1,800 US dollars, driven by the weakness of the US dollar and the divergence of Treasury yields. The yellow metal is also rising as investors prepare for long-awaited US inflation data this week, which may show a slowdown in price growth. The price of XAU/USD rose towards the resistance level of 1790 dollars per ounce and the closest to the psychological top of 1800 dollars. Overall, gold prices have trimmed much of their losses this year, sliding only 1.4% since the beginning of the year.
Silver, the sister commodity to gold, also emerged at the beginning of the week’s trading. Silver futures rose to $20.63 an ounce. Despite notable gains in the price of the white metal by 9% over the past month, it is still down by about 11% over the course of 2022.
Gold has defied conventional thinking by rallying after widespread expectations that the Federal Reserve will maintain its hawkish stance on raising US interest rates amid a strong labor market. Markets are expecting the Fed to raise the Fed funds rate by 75 basis points at next month’s FOMC policy meeting.
The leading US consumer price index for July will be in focus this week. Economists expect the annual US inflation rate to fall to 8.7%, but the core inflation rate, which removes the volatile food and energy sectors, will rise to 6.1%.
Geopolitical tensions linger in the background as well as investors watch China’s response after House Speaker Nancy Pelosi’s visit to Taiwan last week. Beijing swells military exercises in the region. However, Jim Wyckoff, chief analyst at Kitco.com, noted that financial markets are in for “tough summer days,” so trading volumes won’t be as massive as they were at other times of the year.
He added, “We are in the ‘summer days’, when trading volumes dwindle in many markets as investors turn away from the markets and take family vacations. Most of Europe is on vacation during August. Markets are likely to be quieter until after the US Labor Day holiday in early September.”
Meanwhile, gold benefited from the dollar’s decline as the US Dollar Index (DXY), a measure of the dollar against a basket of major currencies, fell 0.18% to 106.42, from an opening at 106.62. A weaker price is beneficial for dollar-priced commodities because it makes them cheaper to buy for foreign investors.
Factors affecting the gold market
The US Treasury market was mixed, with the benchmark 10-year bond yield falling 7.7 basis points to 2.763%. One-year yields rose only 0.5 basis points to 3.274%, while 30-year yields fell 7.3 basis points. The spread between two-year and ten-year Treasuries has widened to nearly -50 basis points. In general, gold benefits from lower returns because it reduces the opportunity cost of holding non-yielding bullion.
In other metals markets, copper futures rose to $3.5845 a pound. Platinum futures rose to $939.80 an ounce. Palladium futures rose to $2,237.150 an ounce.
Today’s XAU/USD Gold Price Forecast:
As I mentioned before, the XAU/USD gold price crossed the top of $1800 an ounce. It will support the bullish trend and warn of more technical longs to test stronger ascending levels, and the next if this happens will be the resistance levels of 1818 and 1832 dollars, respectively. On the other hand, and over the same time period, the bullish momentum will be affected if the gold price returns below the $1770 support level for an ounce. I still prefer buying gold from every bearish level. I expect a relatively quiet trading session today.
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