Title: Gold Price Forecast: XAUUSD seems vulnerable near YTD low, remains below $1,750 ahead of NFP

Jul 08, 2022 7:04 AM ET

By: AnalysisWatch

The gold price continued to struggle to make a meaningful recovery from its low for the year.

Aggressive Fed rate hike bets kept the USD near a 20-year high and limited gains.

Recession fears acted as a tailwind for the XAUUSD as focus remained on the NFP report.

Gold continued its consolidation move on Friday and remained trapped in a range below $1,750 until early European trading.

Investors seem convinced that the US Federal Reserve will stick to a faster pace of monetary tightening to combat stubbornly high inflation. The bets were reinforced by the unsurprisingly hawkish minutes of the FOMC meeting on 14-15 June. Policymakers stressed the need to fight inflation even if it leads to a slowdown in the economy and hinted that another 50 or 75 basis point rate hike was likely at the July meeting. This in turn was seen as a key factor that continued to act as a headwind for non-interest rate gold.

The prospects of more aggressive Fed rate hikes kept the US dollar near a two-decade high and further weakened the dollar-denominated commodity. However, the downtrend is being cushioned by growing recession fears, which contained the bullish move in US equity markets overnight and offered some support to the safe-haven XAUUSD. Traders were also reluctant to make aggressive bets, preferring to wait on the sidelines ahead of the release of the highly anticipated US labour market data on Friday.

The widely reported NFP report is expected to show that the US economy added 268,000 jobs in June, down from 390,000 in the previous month. However, the unemployment rate is expected to remain at 3.6% for the month. The data would influence near-term USD price dynamics, which, along with general risk sentiment, should provide some lift to gold prices. However, the lack of significant buying interest suggests that the short-term downtrend may be far from over.

Any recovery attempt could therefore be seen as an opportunity for bearish traders and runs the risk of quickly fizzling out again. Nonetheless, the XAUUSD remains on track to end the fourth consecutive week in the red, just above its lowest level since September 2021, which was around $1,732 on Wednesday.