XAUUSD - Gold prices rebounded from yesterday’s low of $1,820 to $1,826 during the Asian session today. The sudden rise in gold prices owes mainly to the decreasing dollar strength seen during this session. The dollar index (DXY) was seen below 104 during the Asian session today. The price had fallen lower to 103.88 and ranging in this region presently. This has favoured gold which is an anti-dollar commodity.
Notwithstanding the current rise in gold prices, analysts are still bearish on gold prices over the fears of a further interest rate hike by the Fed during their next session in July. The monetary policy committee had hinted at placing their disposition to further hike the interest rate in July after the 75 basis points hike this month.
Gold prices have never been favoured by aggressive interest rate hikes as the precious metal is only a hedge against inflation. This means - the prices rise when the inflation rate is high and fall when the interest rate is hiked to reduce inflation.
As fears of further interest rate hikes persist, analysts would target every new high and resistance point reached by gold this week as an excellent shorting opportunity. The next resistance to watch out for gold is seen at $1,837. Should the price break above this point, we can look to the next resistance at $1,852.
Alternatively, suppose gold fails to hold above the current position and falls below the support at $1,821. In that case, we might witness a free fall to $1808.
Nonetheless, gold prices will experience significant volatility today during the European session when the CB Consumer Confidence report will be released. This data gives an index of the Consumers' spending which is used to measure the consumers' confidence in the economy. The forecast for this data is 100.0, while the previous record was 106.4. A higher reading from this data will strengthen the US dollar and weaken gold. On the contrary, should the data come out lower than forecast, we might experience a surge in gold prices up to the next resistance at $1,837.
On another note, gold prices may surge higher this week once the decision to ban the importation of gold from Russia is announced and implemented by the G7. US president Joe Biden reported last Sunday that the country in union with the G7 will be placing a ban on importing gold from Russia as a punishment for invading Ukraine. The G7 is currently holding its 48th Summit meeting in Germany. There was a news leak about a potential ban on the importation of gold from Russia to stiffen the Russian economy and make it difficult for them to procure more arms for wars. This implementation might create more scarcity in gold as Russia is one of the largest suppliers of gold, possibly pushing the price of gold even higher.
Finally, investors are advised to use proper risk management when extreme market volatility is expected.