Precious Metals Review

“Gold dropped more than 1% on Friday ​as the U.S. dollar ​regained footing, but was ​still on track to post its first monthly rise since February as investors pared back rate hike bets after the Federal Reserve meeting this week.

Spot gold slipped ⁠1% ‌to $4,062.05 per ounce by 0857 GMT but was ⁠headed for a weekly rise of 0.5%. Prices were also up about 1.7% so far this month.

U.S. gold futures for August delivery dropped 1.1% to $4,059.70.

“Gold struggles to regain meaningful momentum and remains ‌in the corrective phase of a broader structural bull market,” independent analyst Ross Norman said.

“The dollar index has staged a modest recovery ​back above the key 100 level following its sharp post-FOMC sell-off, taking some of the shine off gold today.”

The dollar gained 0.3% after dropping about 2.4% on Thursday, in its biggest one-day drop since January ⁠2023. A stronger dollar makes bullion more expensive for holders of other currencies.

On Wednesday, the ‌Fed left interest rates unchanged at its policy meeting, ‌while U.S. central bank chief Kevin Warsh vowed to bring inflation down, leaving markets confused.

Traders are now pricing in a 63% chance of a rate hike in September, versus ⁠an over 80% chance a week before, according to the CME FedWatch ⁠Tool.

Data on Thursday showed U.S inflation slowed in June, but the ⁠easing was likely temporary as renewed hostilities in the Middle East lifted oil prices.

Surging energy costs have heightened inflation concerns ​and reinforced expectations of elevated U.S. interest ‌rates, undermining the appeal of the non-yielding bullion.

Meanwhile, gold demand in India remained muted this week as buyers waited for clearer price direction, while a stronger yuan lifted purchases in top consumer China.”

“Gold (XAU/USD) remains trapped in its month-old $4,000-$4,200 range as the Federal Reserve’s (Fed) new era of limited forward guidance fails to shake the precious metal out of its sideways grind after policymakers left interest rates unchanged at 3.50%-3.75%.

At the time of writing, XAU/USD trades around $4,095 during American trading hours on Thursday, recovering from an intraday low of $4,028. The precious metal edges higher as the US Dollar (USD) comes under renewed selling pressure following suspected intervention by Japanese authorities to stem the Yen’s weakness.

The US Dollar Index (DXY), which tracks the currency against a basket of six major peers, trades around 99.90, its lowest level since June 17, down 0.90% on the day.

The latest US economic data add to the downside. Inflation cooled in June as the Core Personal Consumption Expenditures (PCE) Price Index rose 0.1% MoM, below the 0.2% forecast and down from 0.3% in May. Annual core inflation eased to 3.3% from 3.4%, in line with market expectations. The US economy grew at an annualized pace of 1.5% in the second quarter, missing forecasts of 2.1%.

However, Gold struggles to capitalize on the weaker US Dollar as the war in the Middle East keeps energy-driven inflation risks elevated. Fed Chair Kevin Warsh’s firm stance on inflation and three dissenting votes in favour of a 25-basis-point (bps) rate hike keep hawkish expectations alive. The CME FedWatch Tool shows a 55% probability that the central bank will raise interest rates in September.

Meanwhile, on the geopolitical front, the US military said it completed a “heavy wave of strikes” against Iran on Thursday in retaliation for Tehran’s ballistic-missile attack on US forces in Jordan, restarting the back-and-forth attacks in the region.

On the daily chart, XAU/USD remains confined to its $4,000-$4,200 range, trading around the 20-day SMA, which also serves as the Bollinger middle band, near $4,072. This keeps the short-term outlook neutral and points to a lack of clear directional momentum.

The Relative Strength Index (RSI) at 48 sits just below neutral, and the Moving Average Convergence Divergence (MACD) remains positive, together suggesting a constructive but not overstretched recovery within a moderately trending backdrop indicated by an Average Directional Index (ADX) reading of 30.

On the downside, the psychological $4,000 mark remains the key support holding the range together. A sustained break below this level would expose the Bollinger lower band near $3,969 and signal a possible bearish breakout.

On the upside, the Bollinger upper band near $4,176 offers initial resistance, followed by the upper boundary of the range at $4,200. A daily close above $4,200 would be needed to confirm a bullish breakout and open the door to further gains.”