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- Gold meets with a fresh supply on Tuesday and drifts back closer to a one-month low.
- Aggressive Fed rate hike bets continue to drive flows away from the non-yielding metal.
- Retreating US bon9d yields, a weaker USD does little to impress bulls or lend any support.
Gold struggles to capitalize on the previous day’s goodish bounce from the $1,720 area and meets with a fresh supply on Tuesday. The steady intraday descent extends through the early North American session and drags the XAU/USD to the $1,730 region, well within the striking distance of over a one-month low touched on Monday.
Despite modest US dollar weakness and a further decline in the US Treasury bond yields, gold, so far, has struggled to gain any meaningful traction amid expectations for more aggressive Fed rate hikes. In fact, the current market pricing point to a great chance of a 75 bps rate increase at the September FOMC policy meeting. The bets were reaffirmed by Fed Chair Jerome Powell’s hawkish remarks on Friday, which, in turn, is seen exerting some pressure on the non-yielding yellow metal.
The downside, however, seems cushioned, at least for the time being, amid growing worries about a deeper global economic downturn, which continues to weigh on investors’ sentiment. This is evident from the fact that the intraday optimistic move in the equity markets has already started losing steam. Recession fears could drive some haven flows and turn out to be the only factor that could help limit deeper losses for gold. That said, the emergence of fresh selling favours bearish traders.
Hence, a subsequent slide back towards the $1,700 round-figure mark, en route to the $1,680 region or the YTD low touched in July, looks like a distinct possibility. That said, traders might prefer to wait for a fresh catalyst before positioning for any further downside. Hence, the focus will remain glued to the release of the closely-watched US monthly jobs data on Friday. The popularly known NFP report will influence the USD price dynamics and provide a fresh directional impetus to gold.
In the meantime, traders will take cues from other important US macro data, starting with Tuesday’s release of the Conference Board’s Consumer Confidence Index and JOLTS Job Openings. Apart from this, the US bond yields, the USD and the broader market risk sentiment will be looked upon to grab short-term opportunities around gold.