The hallmark of the bearish trend for gold was witnessed yesterday when the bears attacked the precious metal once more, pushing down its price to its lowest point in 2022, at $1,697. The increasing dollar strength, which saw the dollar index rise to 109.2 yesterday, has primarily affected gold prices leading to further downside for XAUUSD. Investors were forced to sell off following the news of a higher CPI reading which showed the rate of US inflation at its highest record in forty years with a history of 9.1% YoY. The CPI report MoM was given at 1.3%, marking a 0.3% increase from its previous record of 1.0% the last month, clearly indicating that inflation has not peaked yet. The US June CPI reading YoY was 9.1%, marking a four-decade high. Investors sold off their risky assets holdings, especially gold, as they feared a more aggressive response from the Fed during their next session in the coming week. Gold, therefore, witnessed a free fall yesterday, bringing its price down to $1,697. Some analysts tend to describe the current week as a unique bear week for gold, wherein gold prices fell by over 1.9% in a single week shedding off over 1,500 pips in seven days.
At present, gold seems to be absorbing its loss on Thursday. The bulls seem to be defending the age-long support at $1,697 and recovered above $1,700 during the Asian session on Friday Asia session. Gold is currently testing resistance marked at $1,720. A break above this point will give way to the next pivot level at $1,740. Alternatively, suppose it fails to rise above the resistance. In that case, it may retest the previous low at $1,697 and possibly below it, with the target as $1,680, the lowest point created in August 2021.
Factors that influence gold prices today
There are two significant events from the economic calendar to influence gold’s prices today. We have discussed them below:
- Retail Sales report: The retail sales data measures the change in the value of sales made by retailers. This data provides the most reliable consumer spending insight. More sales will indicate consumers’ confidence in the economy, which is a good sign for the US dollar. A lower reading suggests an inability to purchase all the desired products by consumers due to high prices. This will favour gold momentarily. However, it might further push the Fed towards an aggressive interest rate hike in July, a disadvantage for gold afterward. The forecast for this data is 0.9%, while the previous record was -0.3%.
- Prelim University of Michigan (UoM) Consumer Sentiment: Another essential data to be released today is the UoM Consumer Sentiment report which is a composite index on samples of Consumers’ feelings carried out on over 500 different consumers. Here the respondents give their feelings regarding the economy and future expectations given the current situation. Good consumers’ sentiment towards the economy is good for the US dollar. Therefore, higher reading from this data will strengthen the US dollar and weaken gold. A lower reading will support gold and undermine the dollar index. The forecast for this data is 49.0, while the previous record was 50.0.
