Gold Price to Hit Monthly Low After Failing to Defend the Month’s Opening Range.

Gold

After failing to test the July high, the Gold price threatens the monthly low ($1754)), and its failure to defend the opening range for August may cause a further decline in the precious metal as it extends the series of lower highs and lows.

Currently, Gold Price trades back below the 50-Day SMA ($1776) as it returns the advance following the Federal Open Market Committee (FOMC) Minutes. Bullion may run in the negative slope in the moving average to largely mirror the price action from June.

It appears that as long as the Federal Reserve continues to hike rates, the price of gold will keep on declining. The market anticipates the decision of the central bank to adjust its rate hike after obtaining this information on its effect on the price of gold. Traders await September 2, 2022, as Chairman Jerome Powell and Co. are slated to update the Summary of Economic Projections (SEP).

Therefore, expectations for higher US interest rates may continue to weaken the price of gold.

The FOMC emphasizes that “moving to a restrictive stance of the policy rate in the near term would also be appropriate from a risk-management perspective because it would better position the Committee to raise the policy rate further, to appropriately restrictive levels, if inflation were to run higher than expected.”

Predictions of a shift in the Fed’s method of combating inflation may increase the appeal of gold as the CME Fed Watch Tool reflects a 60% probability for a 50bp rate hike in September. Bullion may largely preserve the advance from the yearly low ($1681) as the FOMC acknowledges that “it likely would become appropriate at some point to slow the pace of policy rate increases.”

Therefore, waning expectations for another 75bp Fed rate hike may limit the downside risk for the price of gold, but the precious metal may track the negative slope in the 50-Day SMA ($1776) following the failed attempt to test the July high ($1814).

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