The attraction of gold as a hedge against falls in the stock market helped it. The Nasdaq-100 Index (NDX) ended the day 0.16% lower, breaking a two-day winning streak. Gold’s decline is explained by the increase in Asia-Pacific stocks on June 23. In his hearing prior to actually the Senate Banking Committee this morning, Federal Reserve Chair Jerome Powell stoked concerns about a possible global recession.
Given that the US central bank is raising rates to combat increasing prices, Powell’s remarks are particularly significant for XAU/USD. Bullion has been supported by inflation, but it is being hampered by rising Treasury yields brought on by the FOMC’s activities. As a non-interest bearing asset, gold often suffers from rising government bond yields.
The Fed’s 75-basis-point rate boost has also decreased market-based inflation bets. On Wednesday, the 2-year US breakeven rate dropped to 3.68%, marking its lowest level since February. This decrease indicates that the Fed’s attempts to control inflation are bearing fruit. Additionally, with oil being a major contributor to overall inflation, falling oil costs are another factor that may have an impact on gold prices. WTI crude prices have fallen almost 5% from Monday, adding to the 8.5% decline from the previous week.
Oil prices are declining because recession prospects are rising, which might be good for gold. Due to these opposing foundations, gold is now in a dangerous situation. Throughout recessions, investors are drawn to gold because XAU has store of value properties. On June 24, the final June Michigan Consumer Sentiment Survey will reveal revised consumer inflation expectations, which could affect those estimates.
The rest of this week is relatively calm in terms of economic developments, but on Monday, June 27, the Atlanta Fed is expected to release an update to its GDPNow real GDP estimate. The indicator for second-quarter GDP growth dropped to 0.0 % in the most recent estimate, garnering considerable notice. The price of precious metals could become volatile if the next update falls into the negative zone.
Since Monday, the price has been tightly wound slightly over the 1830 mark. The MACD and Relative Strength Index have both steadied under their corresponding midpoints at the same time. A breakthrough or collapse may be indicated by the behavior. On the negative side, support could come from the psychologically significant 1800 level. Prices may also be limited by an upward trendline or the 61.8% Fibonacci retracement.