In the recently concluded week, the trading prices of gold concluded close to $2,290 per ounce, marking a continuity in its descending trajectory. This has been charted as its least impressive weekly performance going back to the latter days of June. The diminishing appeal of this precious metal can be attributed to several macro-economic factors, chief among them being the strengthening of the American dollar. This uptick in the dollar’s value comes on the back of stricter trade policies enacted by the United States.
The escalation in US trade policy rigor could be traced back to moves by President Donald Trump, who endorsed the implementation of a base tariff of 10% applied globally. This was supplemented by retaliatory tariffs that could soar up to 41% on nations devoid of a trade pact with the US. Furthermore, a substantial 40% tariff was levied on goods believed to be circumventing sanctions through intermediary countries. These policy measures reflect a significant shift in the US’s approach to international trade under President Trump’s administration, emphasizing a more protectionist stance aimed at bolstering domestic industries and reducing trade deficits.
The prospect of gold as a refuge asset was further marred by recent economic data from the US. Reports for June showed that both the core consumer price index (CPI) and producer price index (PPI) exceeded initial forecasts. This unexpected elevation in inflation rates fosters speculation about the Federal Reserve’s readiness to cut interest rates by September, casting shadows on the future monetary policy direction. Typically, lower interest rates increase the attractiveness of non-yielding assets like gold. However, the current scenario of rising inflation and potential for rate hikes dampens this appeal.
Looking forward, the market’s focus is poised to shift toward the US jobs report for July. This forthcoming report holds the potential to provide clearer insights into the Federal Reserve’s forthcoming decisions and consequently, will likely influence short-term expectations for precious metals including gold.
Delving into technical analysis, the XAU/USD pair is currently showing signs of consolidation, trading around the $2,298 mark. However, a potential break downwards could lead prices to touch the $2,255 level, indicating the possibility of further declines to $2,247. This movement is perceived as part of a broader negative trend, with a more significant target set at $2,055. Analysis based on the Moving Average Convergence Divergence (MACD) indicator supports this bearish outlook, with the signal line positioned below zero and significantly trending downwards.
An alternative perspective from the hourly charts for the XAU/USD pair corroborates the consolidation trend near $2,298, with a potential slide to $2,263 potentially on the horizon. This could be succeeded by a rebound towards the $2,298 mark before another pullback to the $2,255 and eventually $2,247 levels. The Stochastic oscillator further underscores this prediction, highlighting a downtrend momentum.
In conclusion, the golden allure seems dimmed amidst uncertainties stirred by trade policies and projections of a hawkish Federal Reserve stance. A breach beneath pivotal support levels may hasten the declines, whereas any dovish data emerging from the US could offer a temporary respite to the beleaguered metal.
It’s paramount to note that the insights provided herein, particularly the technical analysis and market prognoses, are rooted in the personal opinions of the analysts from RoboForex Analytical Department. Such analyses should not be considered as definitive trading advice, as they are but perspectives based on current market conditions. As always, traders are advised to conduct their due diligence and bear full responsibility for their trading decisions.
This whole scenario underlines the intricate interplay between geopolitical events, national economic policies, and the global financial markets. The intricate dance between these variables often defines the shifts in asset valuations, presenting both risks and opportunities to global investors.
