Gold price eased from the two-month high hit earlier in the day as the US dollar rebounded. Even so, expectations of a less hawkish Federal Reserve have continued to render support to the precious metal.
Fundamentals
As has been the case for months now, the Federal Reserve’s policy decision is a key driver of gold price. As it stands, the financial markets have priced in an interest rate hike of 25 basis points to the 5.25% – 5.50% range during the central bank’s next meeting on 25th – 26th July.
In its June meeting, the Fed decided to pause on its interest rate increases to assess the impact of the past 10 hikes. While that move was agreed upon, there are uncertainties over the bank’s next move. Indeed, the confusion is evident in recent movements by the US dollar and gold price by extension.
A slower pace of interest rate hikes would be rather bullish for the precious metal. However, the latest jobless claims data came in at 228,000 compared to the prior week’s 237,000 and analysts’ estimate of 242,000.
The figures have heightened bets of a hawkish Fed. This explains the reported rebound in the US dollar and Treasury yields. Late on Thursday, the benchmark 10-year US bond yields was up by 2.56%; increasing the opportunity cost of holding the non-yielding bullion.
Gold price technical analysis
Gold price hit a fresh two-month high earlier on Thursday before easing. Since late June, the precious metal has risen by over 4% as the bulls strive to retest the psychologically crucial zone of 2,000.
A look at its daily chart shows the asset trading above the 25 and 50-day EMAs. Indeed, the two MAs appear to be converging at around 1,950. The probable formation of a golden cross will further hint at additional gains in the ensuing sessions.
In the short term, I expect gold price to continue trading above the crucial support level of 1,950. More specifically, the bulls will be striving to defend the support at 1,967.06. On the upper side, the next target is at 2,006.63.
