Gold Price Range-Bound As US Dollar Recovers Ground

Summary:
• A high demand for the US dollar is putting pressure on gold price despite recent drop in US Nonfarm Payroll numbers and weak PMI data

Gold price declined on Tuesday, losing 0.16 percent to trade at $2320 per ounce at the spot market. Similarly, futures gold was down by 0.12 percent and traded at $2328 per ounce at the time of writing. The yellow metal has lost momentum on renewed appetite for the US dollar, losing the upbeat sentiment brought by the lower-than-expected  NFP figures released last week.

The US dollar has received a boost after news of a possible ceasefire deal between Israel and Hamas. This has weakened the safe-haven demand for gold, despite Israel rejecting the deal, stating that the terms of the ceasefire do not align with its objectives. Furthermore, Israel has reiterated that it will proceed with a ground offensive whether a ceasefire deal is in place or not. This will likely put a lid on gains by the US dollar against gold.

While the US dollar currently has the upper hand against gold, a series of disappointing macroeconomic data is likely to raise the prospects of rate cuts in the third quarter of the year. That said, the latest comments by FOMC members John Williams and Thomas Barkin signal that the Fed is still more concerned with bringing down inflation rate to 2%.  A continuation of this hawkish stand will provide the dollar with armour against gold in the near term. 

Elsewhere, yields on benchmark 10-year US treasuries have subsided significantly to stand around 4.40% as of this writing. This has eased the pressure on non-yielding gold, considering that the yield rate previously stayed above 4.60% for more than three weeks.

Technical analysis

The RSI indicator on XAU/USD chart signals that the sellers are currently in control. The downside is likely to continue if the price action stays below 2321.05 (pivot point).  The current momentum will likely see the sellers breach the support at 2313.30 and potentially proceed to test 2308.02 in extension. Conversely, a move above the pivot point will swing the momentum in favour of the buyers, with the next resistance likely to come at 2326.00.  A continuation of that control will likely breach the resistance and thus invalidate the downside narrative. Furthermore, the buyers could go on to test 2331.11.