Title: International Gold Price Sees Short-Term Resistance at $1916
Date: August 16, 2022
On Wednesday, international gold prices experienced a rebound after hitting a record low of $1,896.26 since June 29. The recovery came as the U.S. dollar index fell, giving gold a short-term resistance level at $1,916. Despite this bounce, market analysts remain cautious, expecting the Federal Reserve to continue its monetary tightening cycle, which could limit the extent of gold price recovery.
At 15:08 Beijing time, spot gold rose by 0.17% to $1,904.93 per ounce, while the main COMEX gold futures contract rose by 0.03% to $1,935.8 per ounce. Concurrently, the U.S. dollar index experienced a 0.14% decline, reaching 103.051.
Yeap Jun Rong, a market strategist at IG, noted that recent increases in real yields, combined with a stronger U.S. dollar, have reduced the appeal of gold and prompted some investors to shy away. Rong added, “Prolonged high interest rates provide room. The U.S. retail sales data released yesterday offset recession fears and could dampen safe-haven flows.”
The latest data reveals that holdings of the SPDR Gold Trust, the world‘s largest gold-backed exchange-traded fund, have dropped to their lowest level since January 2020. This decline reflects a lack of investor confidence in the precious metal, with no inflows reported since late July.
Despite concerns, U.S. retail sales for July exceeded expectations, emphasizing the economy’s resilience despite the Federal Reserve’s aggressive rate hikes aimed at controlling inflation. Investors eagerly await the release of the Federal Reserve’s July policy meeting minutes later today to gain insight into the bank’s upcoming interest rate strategy.
Minneapolis Fed President Kashkari commented on Tuesday that while progress has been made in combating inflation, interest rates may still need to increase further to effectively address the issue. He emphasized the need for “convincing” evidence of further inflation decline to ensure the Federal Reserve is taking adequate action.
Technical analysis suggests that gold prices may experience a short-term rebound to the $1,916 neckline. However, the daily chart indicates that gold is currently in a downward C-wave starting at $1,987, with the lower support at $1,871, targeting the 61.8% retracement level. This C-wave represents a sub-wave of the downward (ii) wave, which initiated at $2,082.
Although the international gold price has found some stability, uncertainties surrounding the Federal Reserve’s monetary policy and inflation levels may continue to limit the extent of the rebound. Investors will closely monitor the minutes of the July policy meeting for clues on the bank’s future course of action.