The price of gold fell sharply as Treasury yields rose and investors weighed a possible cancellation of some US tariffs on Chinese consumer goods that could help ease inflation. Accordingly, the gold price fell amid strong selling to the support level of $1,763 an ounce in early trading today, Wednesday, the lowest price for gold throughout the year 2022 trading.
People familiar with the deliberations said US President Joe Biden may announce a rollback of some tariffs as soon as this week, although the timing may be delayed and the final decision is made. It would be Biden’s first major policy move on trade relations with China and appears aimed at curbing inflation, which has driven up interest rates and reduced the allure of zero-interest gold. In this regard, Chinese Vice Premier Liu He discussed the US tariffs in a phone call with Treasury Secretary Janet Yellen.
In general, the price of the yellow metal, XAU/USD, declined over the past three months due to higher interest rates, but it managed to hold above $1800 an ounce amid fears of a recession that may enhance its attractiveness as a safe haven. However, prices formed a so-called death cross pattern – when the 50-day moving average drops below its 200-day counterpart – which is a bearish signal for some traders.
Today, the US Federal Reserve’s latest meeting minutes will be analyzed for clues to the Fed’s narrow path and whether it is likely to raise US interest rates by 50 or 75 basis points at its July 26-27 meeting. Therefore, investors are likely to remain on the sidelines until the release of the Federal Reserve’s meeting minutes, non-farm payrolls and US unemployment data due on Friday.
According to the experts. If the Biden administration scraps some Trump-era tariffs on Chinese goods, it will certainly be good news for consumers and inflation. This could mean that the Fed won’t need to do much to rein in inflation if this is passed, and it will be good for gold.
There is no doubt that the XAU/USD gold price breaching the $1775 support level supports the bears’ control over the general trend of the yellow metal. As I mentioned before, the $1800 level remained for a long time an important barrier for both bears and bulls to control the trend. After the recent performance, and if prices move towards the support levels of 1760 and 1745 dollars, respectively, the technical indicators will move towards oversold levels, and accordingly, gold investors may think of seizing opportunities to buy gold again.
The return of the XAU/USD gold price stability above the psychological resistance of 1800 dollars an ounce is still important for the gold bulls to launch higher again. The events of today and next Friday are very important to determine the path of the gold price in the coming days, and accordingly I expect movements in narrow ranges until the reaction to these events. Overall I still prefer buying gold from every bearish level.