Currently, gold investors are looking for more appropriate levels to buy in order to take advantage of the recent decline.
- Gold futures fell in the middle of the trading week amid increasing US dollar strength. Investors resorted to the dollar during the debt ceiling crisis.
- The precious metal has been on a downtrend since hitting a record high, triggered by the growing uncertainty surrounding the debt limit fight.
- Gold price declined towards the support level of 1957 dollars an ounce and settled around it in the beginning of this week's trading. All in all, gold prices have fallen by more than 1% this week, but have remained up nearly 8% since the beginning of 2023.
The price of silver, gold's sister commodity, dropped to $23 in the middle of the week. Silver futures fell to $23,225 an ounce. All in all, the price of the white metal has also fallen by 3% this week and turned negative for the year, dropping nearly 4%.
In general, gold prices fell for the third consecutive session, driven by investors' search for a safe haven in safe-haven assets, such as the US dollar, as Washington failed to reach an agreement to raise the debt ceiling. Accordingly, the US Dollar Index (DXY), a measure of the US currency against a basket of other major currencies, rose to 103.79, from an opening of 103.49. The index jumped nearly 1% this week and turned positive year over year, up 0.25%.
Generally, a stronger profit is bad for dollar-denominated commodities because it makes them more expensive for foreign investors to buy. Changing expectations that the Fed will raise interest rates also affected the dollar.
According to CME FedWatch, the FOMC is expected to hit the pause button on rate hikes in June but then raise rates in July.
The US Treasury market is also up across the board. The 10-year yield added 2.7 basis points to 3.725 percent. But short-term bond yields were on the rise, led by the one-month bill, which jumped nearly 12 basis points to 5.729%. The 30-year yield rose 1.6 basis points to 3.968%. The gold market in general is sensitive to movements in interest rates because they can affect the opportunity cost of holding non-yielding bullion. In the short term, the two main drivers for gold markets will be the debt ceiling and the Fed's tightening efforts. Central bank officials have yet to raise interest rates, warning that inflation is too high and underlying pressures remain.
Relative to other metals markets, copper futures fell to $3.5605 a pound. Platinum futures fell to $1,028.70 an ounce. Palladium futures fell to $1,406.50 an ounce.
Gold Technical Outlook:
According to the performance on the daily chart below, the XAU/USD (gold) price is still within the range of a descending channel that was formed since the bulls abandoned the psychological resistance level of $2000 an ounce. The general trend will not turn bullish without returning to the vicinity of that top. Currently, gold investors are looking for more appropriate levels to buy in order to take advantage of the recent decline, and currently I see that the support levels at 1947 and 1928 dollars, respectively, are the most appropriate to do so without risk. The price of gold today will be affected by the US dollar's reaction to the announcement of the US economic growth rate, the number of weekly US jobless claims, and the future of determining the US debt ceiling.