Gold has declined from $1,980 to $1,950 per ounce following the solid rebound of the greenback. The sharp fall of EUR/USD on the forex market, dropping below 1.10, has once again hindered gold’s attempts to surpass the psychological threshold of $2,000 per ounce.
This week’s main market driver has been the European Central Bank (ECB) meeting rather than the Federal Reserve, along with solid macroeconomic figures from the US, including a Q2 GDP well above expectations at +2.4% compared to the forecasted +1.8%.
Focusing on central banks, the ECB raised its interest rate for the ninth consecutive time, reaching a record level of 4.25%. The decision had been widely expected and came shortly after the Fed increased US rates from 5.25% to 5.50%, reaching a 22-year high.
While the ECB and Fed policymakers have left the door open for new hikes, the speech given by ECB President Christine Lagarde was more dovish than anticipated. Previously, the market had been reasonably sure that the ECB would proceed with one or two more rate increases in the autumn. However, this certainty has now been replaced by uncertainty following Lagarde’s speech.
Overall, a dovish ECB should have represented positive news for gold. But in this case, it generated a quick rally of the USD, which is negatively linked with the bullion price movement.
From a technical standpoint, gold has slightly rebounded from yesterday’s low at $1,940, which is now considered the first support zone, and this represents a positive signal. The closing of the gold price this evening will be crucial in determining whether the markets have fully absorbed the macroeconomic news from yesterday.
Carlo is an external market analyst for Kinesis Money. With a credential background in Economic Finance and International Exchange (MA), Carlo’s critical analysis of gold and silver markets’ performance is frequently quoted by leading publications such as Forbes, Reuters, CNBC, and Nasdaq.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.
