GOLD: Stalled Rally and Impact of Inflation and Dollar Decline

Gold Price Consolidates as Inflation Concerns and Dollar Decline Keep Market Uncertain

The price of gold, represented by XAU/USD, has remained relatively stagnant, hovering around the $1,960 and $1,957 levels. Despite a recent strong rally that brought it close to $1,960.00, the precious metal has struggled to find sustained momentum. This lackluster performance comes even as the latest reports on inflation and the Producer Price Index (PPI) for June indicate softening demand and a continued pursuit of the 2% inflation target.

Interestingly, while the US Dollar Index (DXY) has experienced a significant decline, gold has not been able to fully capitalize on the weakening greenback. The DXY dropped below the psychological threshold of 100.00 and currently hovers near 99.65. Market expectations of only one interest rate hike announcement from the Federal Reserve (Fed) by the end of the year have contributed to the substantial decline in the USD Index.

However, contrary to these expectations, Fed Governor Christopher Waller has expressed confidence that two additional interest rate hikes are warranted in order to curb inflation and bring it down to the target of 2%. This hawkish commentary from Waller has provided some support to US Treasury yields. Notably, yields on 10-year US Treasury bonds have risen to approximately 3.77%.

The interplay between inflation concerns, the weakening dollar, and the divergent opinions within the Federal Reserve has contributed to the uncertainty surrounding the gold market. As a result, gold price movement has remained relatively subdued, with the market seeking further clarity and direction.

Market participants will closely monitor developments in inflation data, central bank statements, and US Treasury yields to gauge the potential impact on gold prices moving forward.

Panoramic View:



Pivot Point : 1952.00

Our preferred Scenario:

Long positions above 1952.00 with targets at 1964.00 & 1970.00 in extension.