Gold price forecast with Russian gold ban as a non-event

Gold price remains range-bound in the absence of a major catalyst. Traders are unwilling to let go of their current positions amid the opposing forces of economic turmoil and aggressive interest rate hikes.

Fundamentals

Gold price is trading steadily within the horizontal channel of between $2,825.40 and $1,850.71. Notably, this range has been a crucial one for the precious metal for close to two weeks now. The ongoing economic turmoil and Fed’s hawkish stance have largely been behind the range-bound trading.

On the one hand, the Fed and other major central banks have been keen in dealing with the heightened inflationary pressures through the aggressive tightening of their monetary policies. The Fed’s hawkish stance has strengthened the US dollar while weighing on gold price.

As at the time of writing, the greenback was at $103.96. Granted, the currency has been on a decline since hitting a 20-year high of $105.83 two weeks ago. In fact, this is one of the factors that has sustained gold price above the critical zone of $1,800 per ounce. Even so, the dollar index has remained above the psychologically crucial level of $100 for over two months now.

At the same time, the rising Treasury yields have increased the opportunity cost of holding the non-yielding bullion. 3.00% has been a steady support zone following Fed’s interest rate decision earlier in June. Prior to early May, it had been an evasive level for the benchmark 10-year US bond yields since December 2018. Two weeks ago, it rose further to an 11-year high of 3.50% amid an environment of aggressive rate hikes by the Fed.  

Even with these bearish factors, traders are unwilling to commit to either side of the market in the absence of a major catalyst in the market. The ban of Russian gold by G7 nations turned out to be a non-event. This is founded on the fact that buyers have largely stayed clear of Russian assets since its invasion on Ukraine and subsequent sanctions by the West.

On the data front, the market will be reacting to the CB consumer confidence data later in Tuesday’s session. Analysts expect a reading of 100.4, a decline from the previous month’s 106.4. Despite the expected reaction, gold price may remain within its current range. Below the horizontal channel’s lower border, $1,805.35 will be a support level worth watching.