During the previous 24 hours, gold prices have declined, pushing XAU/USD progressively closer to the 1676 low of last year. In actuality, gold has had a very bad month thus far in July. Gold might lose 6.4% in July if losses continue as of this posting. For over a year, this would constitute the poorest performance per month.
What is more shocking is that the valuable metal has not been capable of benefiting from a falling US dollar. If declines continue through this week’s end, the DXY Dollar Index is on track to have its worst week since late May. Demand for the currency related to havens is probably declining as a result of the upbeat stock market mood.
Both the US dollar and the yields on government bonds seem to be inversely correlated with gold. The Federal Reserve‘s actions mostly determine the latter. In 2022, strong monetary tightening and rising yields have reduced gold’s allure.
For most of the demand for gold to return, there would probably need to be a significant reversal in international monetary tightening, thus the precious metal faces a difficult path forward. The European Central Bank (ECB) is likely to increase interest rates later on July 21, so all attention will be on them.
Getting closer to the 2021 bottom at 1676, gold has proven a break below the low at 1722 of September last year. With the 20-day Simple Moving Average (SMA) heading downward, the latter may provide significant support. In the case of an upward turn, this line might continue to act as resistance, possibly reestablishing the focus on the negative. The 78.6% Fibonacci extension at 1656 comes into focus in the event of additional losses.
Approximately 89% of retail traders are net-long, according to the IG Client Sentiment (IGCS) indicator. IGCS frequently exhibits contrarian behavior. This means that prices may continue to decline because the great majority of investors have an upside bias. In comparison to yesterday and last week, the downside exposure has decreased by 3.98% and 21.26%.
