Amidst the strength of the US dollar, gold futures fell below the $1,800 level, despite rising inflation and growing recession fears. Although the yellow metal has outperformed the stock markets, XAU/USD gold prices are still going through a rough two months due to the monetary tightening efforts. With weak economic data, can metal Commodities start rising again?
The price of XAU/USD gold moved towards the support level of $1785 for an ounce, the lowest in a month and a half, and settled around the level of $1810 an ounce at the beginning of this week’s trading. In general, the gold price recorded a weekly loss of 1.5%, in addition to its decline since the start of the year 2022 to date by about 2%. In the same way, prices of silver, the sister commodity to gold, fell below $ 20 for the first time since the early days of the Corona virus epidemic. Silver futures fell to $19.595 an ounce. Accordingly, the price of the white metal recorded another weekly decrease of 6.3%, which raises its decline since the beginning of the year 2022 to date by 16%.
In general, the metals market has struggled in recent weeks due to fears of a bloated recession. With the economic outlook dwindling, there are fears of a drop in demand for the metals. Meanwhile, with rates still rising at a 40-year high, more global central banks are likely to raise interest rates.
The US Treasury market was in decline. With the benchmark 10-year bond yield dropping 17 basis points to 2.804%. The gold market is usually sensitive to the price environment because it raises the opportunity cost of holding non-yielding bullion. Recession fears intensified on Friday, with major indexes of global stock markets falling. The only notable gains were among energy commodities, although they began to pare their significant gains due to demand concerns.
The Institute for Supply Management’s manufacturing Purchasing Managers’ Index (PMI) fell to 53, below market expectations of 54.9. Construction spending fell 0.1% in May, below the average estimate of 54.9, according to the Bureau of Economic Analysis (BEA). The Federal Reserve Bank of Atlanta now estimates second-quarter GDP at -1%. The strong dollar added to gold’s losses. Where the US Dollar Index (DXY), which measures the performance of the US dollar against a basket of major currencies, rose to 105.57, from an opening at 104.69. The index has risen by 10% since the beginning of the year 2022 to date. In general, the rise in the value of money is bad for commodities priced in dollars because it makes them more expensive to purchase for foreign investors.
For other metals markets, copper futures were at $3,5665 a pound. Platinum futures fell to $860.50 an ounce. Palladium futures rose to $1,934.00 an ounce.
XAU/USD Technical Analysis
In the near term and according to the performance on the hourly chart, it appears that the price of the yellow metal XAU/USD is trading within an ascending channel formation. This indicates a sudden change in market sentiment from bearish to bullish. Therefore, the bulls will look to extend their current rebound profits towards $1,814 or higher to $1,820 an ounce. On the other hand, the bears will target potential pullbacks around $1,804 or lower at $1,799 an ounce.
In the long term, and according to the performance on the daily time frame, it appears that the price of XAU/USD is trading within a descending triangle formation. This indicates a possible end to the current downtrend. Therefore, the bulls will target potential long-term bounces around $1,831 or higher at $1,858 an ounce. On the other hand, the bears will look to extend the decline towards $1,785 or lower to $1,756 an ounce.
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