The price of gold decreased following the release of the minutes from the June meeting of the US Federal Reserve. These minutes maintained expectations for a potential increase in interest rates at the conclusion of July.
According to the minutes of the FOMC meeting, the majority of officials were in agreement to maintain interest rates at the June meeting, despite a few participants advocating for an increase. However, it is worth noting that 16 out of 18 officials still anticipated a rise of at least 0.25% in the benchmark interest rate by year-end.
During his biannual testimony last month before the House Financial Services Committee and the Senate Banking Committee, Federal Reserve Chair Powell restated the central bank’s position favoring higher interest rates, suggesting that additional rate hikes may be necessary. Currently, rates futures indicate an 89% probability of a 25 basis points increase at the upcoming July 25-26 Federal Open Market Committee (FOMC) meeting, as reported by the CME FedWatch tool.
The primary emphasis is currently on the upcoming US jobs data, which is scheduled to be released on Friday. It is anticipated that there will be an increase of 225k in non-farm payrolls for the month of June, lower than the 339k growth observed in May. However, it is expected that the unemployment rate will decrease from 3.7% to 3.6%. If the jobs data surpasses expectations, this could solidify the anticipation of a Federal Reserve interest rate hike in the near future and subsequently have a negative impact on the price of gold.
In the academic context, it can be observed that XAU/USD has achieved the price objective of a bearish triangle that was initiated in late June, as indicated by the technical charts. By analyzing the 240-minute chart, it becomes evident that there is a positive momentum divergence present, which signifies a decrease in the intensity of the decline. This divergence is characterized by a declining price accompanied by an increasing 14-period Relative Strength Index. Nevertheless, upon examining the accompanying chart, it is apparent that the moving averages still demonstrate a downward trend, thereby strengthening the bearish inclination!
XAU/USD Daily Chart
In order for the current downward pressure on gold to decrease, it would be necessary for gold to surpass the initial resistance range of 1935-1945. This range includes key indicators such as the end-June high, the 89-period moving average, and the 200-period moving average on the 240-minute charts. If gold manages to break above this resistance area, it could potentially reach the early-June high of 1983.