Gold steadies after sliding to fresh seven-month low
Gold prices remain under pressure as geopolitical tensions in the Middle East fuel concerns about energy-driven inflation. This has led the market to reassess the chances of a Federal Reserve interest rate hike, taking a more hawkish approach.
While gold typically finds support from rising geopolitical and inflationary risks, expectations of higher interest rates are a major drag. This is because gold offers no yield, making it less attractive than interest-bearing assets when interest rates rise.
On the other hand, uncertainty surrounding the prospects for talks between the United States and Iran in Qatar has also supported the strengthening of the US dollar. The US Dollar Index (DXY) is hovering around 101.10 and is on track for its second consecutive monthly gain. A stronger dollar makes gold more expensive for foreign buyers.
According to the CME FedWatch Tool, market participants currently price in a 63% chance of a rate hike at the September meeting. Cleveland Fed President Beth Hammack also stated that higher interest rates may still be needed to bring inflation back to target, although she is concerned about the impact on the economy.
Market focus now turns to this week's US employment data for clues on the Fed's next policy direction. The JOLTS report showed job openings rose to 7.594 million in May, exceeding market expectations of 7.3 million. Next, the market will be watching the ADP Employment Change data on Wednesday and the Nonfarm Payrolls (NFP) on Thursday.
From a technical perspective, the US$4,000 level remains a key psychological support for XAU/USD. As long as this level is not firmly broken, gold has the potential to continue consolidating near its latest low. Societe Generale strategists believe that although gold's decline appears quite deep, there are no signs of a strong rebound yet. If a short-term rebound occurs, the US$4,100 level could serve as initial resistance, while weakness below US$3,885 could potentially open up room towards US$3,750 to US$3,600.
Source: Newsmaker.id
