It has been quite a straightforward downside move in gold after the break of its 100-day moving average (red line) earlier this month. Price is now down 0.1% to $1,905 levels as sellers stay on the hunt of a push towards the $1,900 mark:
Gold (XAU/USD) daily chart
The correction after approaching the 2020 and 2022 highs near $2,070-75 is still ongoing as the dollar also regains its poise in the past two months. If you need a reminder, gold was one of the main beneficiaries of the whole banking crisis this year (with the dollar one of the biggest losers).
The repricing of Fed odds from three rate cuts this year to a higher for longer perspective has been a key theme in dragging gold lower since.
But have we reached a limit on the hawkish scale now? Perhaps. The Fed funds futures curve is seeing a peak in rates at about 5.37% currently and that is just slightly higher from two weeks ago around 5.30%.
So, while there is still a higher for longer view in markets, we’re not exactly running towards pricing in 6% rates just yet.
A lot will come down to what the Fed does next in July but there’s still a whole month to go before we even get to that.
In the meantime, the technicals are the best gauge to try and work out a bias in gold and for now, sellers are still in charge of the swing of things.
We are seeing a test of the 61.8 Fib retracement level of the swing higher from March to May at around $1,904.88. So, that will act alongside the $1,900 mark as being a key support barrier for gold in the sessions ahead.
But if we do get a break of that region, expect price to drop further towards the 200-day moving average (blue line) – seen at around $1,856 currently. Personally, that is where I feel gold will have stronger support as it does present a rather attractive price point and technical level for buyers to lean on in search of a rebound in the big picture.