The price of Gold (XAU/USD) dipped by 0.44% on Tuesday, struggling to clear the significant $4,200 threshold. Escalating concerns over rising US inflation and reported attacks in the Strait of Hormuz have acted as a barrier to the precious metal's momentum. After hitting a peak of $4,180, the pair is currently trading at $4,146. Latest live market data shows the price at $4,120, down 0.84% from the previous close of $4,155.
Inflation Expectations and Trade Data
A recent survey by the NY Fed indicates that American consumers are increasingly worried about the rising cost of living. One-year inflation expectations climbed to 3.7% in June, up from 3.5% in May. Meanwhile, the Goods and Services Trade Balance deficit expanded to $-77.6 billion in April from $-54.6 billion in May, performing slightly better than the market estimate of $-78 billion.
Treasury Yields and Federal Reserve Outlook
Rising US Treasury yields are contributing significantly to the downward pressure on Gold. The US 10-year Treasury yield climbed 5.5 basis points to 4.525%. Data from the Prime Market Terminal suggests that while money markets remain skeptical about a rate hike during the July 29 meeting, there is an nearly 60% probability of an increase by September.
Central Bank Accumulation
The World Gold Council reports that the People’s Bank of China (PBoC) has increased its Gold reserves for 20 consecutive months. By the end of June, their holdings reached 75.44 million fine troy ounces, an increase from 74.96 million the previous month. Central banks often diversify their reserves by purchasing Gold to bolster economic stability and currency trust. In 2022, central banks globally acquired 1,136 tonnes of Gold, valued at roughly $70 billion, marking the highest annual purchase on record.
Technical Indicators and Resistance
The formation of a 'death-cross' on the daily charts suggests that sellers are gaining control. Gold faces a stiff resistance line between $4,200 and $4,225. Technical analysis shows the Relative Strength Index (RSI) at 42, reflecting a bearish sentiment. With a daily ATR of 92.53, volatility remains a factor. The asset is currently trading below its EMA20 of $4,179 and EMA50 of $4,355. Immediate support sits at $4,150, with the psychological mark of $4,100 serving as the next major floor. A breach below this could expose the $4,050 level and potentially the year-to-date low of $3,941.
Gold as a Safe-Haven Asset
Gold has historically served as a reliable store of value and a hedge against currency depreciation. It typically maintains an inverse relationship with the US Dollar and US Treasuries. Because Gold is priced in USD, a stronger dollar usually keeps prices capped, while a weaker dollar often supports a rally. Furthermore, Gold is seen as a hedge against geopolitical instability. As an asset that pays no yield, it is sensitive to interest rate changes; higher rates often weigh on Gold, while lower rates generally favor it.
