Gold need a Savior, Let’s Check out Responsible Factors for the Massive Sell-off in Gold; July 7, 2022

Gold need a Savior, Let’s Check out Responsible Factors for the Massive Sell-off

The yellow metal is still under pressure and touched $1,832 mark in previous session, lowest level since Sept 2021. On the other end, DXY continues to trade around 107.00 mark, highest level of last 20 years and crude oil fell below $100.

One of the key factor behind massive sell – off in gold is Russia – Ukraine Conflicts. The U.S. along with other G7 countries met in late June in Germany to discuss further sanctions to pass on the government of Russian President Vladimir Putin. Among these corrective measures is a ban on Russian gold imports. The impact of the sanctions will in fact be more heavily felt by the U.S. than by Russia. These sanctions bear economic consequences beyond just the energy markets.

Yesterday’s FOMC Meeting Minutes signaled further aggressive monetary policy tightening later this month. The minutes also highlighted the potential for another 50 or 75 basis point rate hike at the end of July.

FOMC Meeting Minutes – Most agreed that risks to inflation were skewed to the upside and cited several such risks, including those associated with ongoing supply bottlenecks and rising energy and commodity prices.

FOMC Meeting Minutes – Downside risks included the possibility that a further tightening in financial conditions would have a larger negative effect on economic activity than anticipated.

Let’s not forget about the U.S. Treasury Yield Curve. U.S. Treasury yields moved higher on Wednesday, but the closely watched 2-year/10-year yield curve remained inverted, a key recession warning. That so-called inversion, particularly if sustained, is often interpreted as a warning sign that the economy may be weakening and a recession is possible.

Technical View:

XAU/USD (Gold):

  • Gold hit fresh 9 –month low in previous session and currently stabilizes above $1,740 mark.
  • The pair made intraday high at $1,746 and Low at $1,736 mark.
  • A day chart and H1 chart with triple EMA suggest bearish trend for the time being.
  • A sustained close above $1,752 on H1 chart requires for the upside rally.
  • Alternatively, a consistent close below $1,732 on H1 chart will test further supports.

Take a look and do trade wisely!
Good Luck