Gold Struggles as US Dollar Gains Momentum, Eyes on US Data

Gold has lost its momentum and currently hovers above the $1,950 level during the Asian session. The recent strength in the US Dollar, supported by upbeat US consumer confidence and mixed Chinese data, has put pressure on gold prices, potentially limiting its upside. Market focus now shifts to upcoming US data releases, including the Empire State Manufacturing Index and Retail Sales, which will provide crucial cues for market direction.

Gold's price has faced difficulties in gaining traction, extending the retracement slide from the $1,965 region observed on Friday. The precious metal currently trades around $1,950, influenced by the impact of mixed Chinese data.

The US Dollar regained strength, rising above its lowest level since April 2022, following the release of an optimistic preliminary reading of the University of Michigan's Consumer Confidence Index. The index rose to 72.6 from 64.4 in June, surpassing market expectations. Additionally, US consumer prices showed a year-on-year increase of 3.0%, down from the previous 4.0%, and the Producer Price Index (PPI) experienced a slight rise of 0.1%, a decrease from the previous 0.9%. These factors have contributed to a perception of a potentially less hawkish stance by the Federal Reserve (Fed) regarding monetary policy tightening after the anticipated interest rate hike in the upcoming July 26 meeting. This development poses a headwind for the US Dollar and may limit the downside for gold. Moreover, Retail Sales figures for June showed a decline to 3.1% year-on-year, lower than the previous 12.7% and below market expectations of 3.2%. The mixed economic figures have provided some support for gold, but investors remain watchful of the impact of Chinese data. It is worth noting that concerns over an economic slowdown in China, being the largest gold consumer, could negatively affect gold prices.

With the Fed entering its blackout period before the July 25-26 meeting, market participants will closely monitor US data releases. The Empire State Manufacturing Index and Retail Sales month-on-month figures for June are due later this week and will be instrumental in influencing the short-term dynamics of the US Dollar, thereby helping to determine the next direction for gold prices.

Pivot Point: 1958.00

Our preferred Scenario:

Short positions below 1958.00 with targets at 1948.00 & 1943.00 in extension.

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