Gold weakens back closer to YTD lows

   “¢   Persistent USD buying interest prompts some fresh selling on Friday.
   “¢   Fed rate hike prospects/fading safe-haven demand adds to the selling bias.

Gold came under some renewed selling pressure on Friday and has now erased all of its modest recovery gains recorded in the previous session.

The US Dollar extended recent gains, now holding near 10-day tops, and was seen as one of the key factors prompting some weakness around dollar-denominated commodities – like gold.  

Meanwhile, Thursday’s US consumer inflation figures for June, with the yearly headline CPI recording its largest increase in nearly 6-1/2 years,  reaffirmed prospects for at least two more Fed rate hikes by the end of this year and exerted some additional downward pressure on the non-yielding yellow metal.

Fed rate hike expectations were further boosted by the Fed Chair Jerome Powell‘s overnight hawkish comments, saying that the economy is in a “good place” at the moment with low unemployment and inflation rising toward the central bank’s optimal range.  

This coupled with a continuous improvement in investors risk appetite amid easing US-China trade tensions, as depicted by a positive trading sentiment around equity markets, also did little to support the precious metal’s safe-haven demand and stall the downfall back closer to YTD lows.  

It would now be interesting to see if the metal is able to find any buying interest at lower levels or continue with its weakening trend in absence of any major market moving economic releases from the US. Nevertheless, the commodity remains on track to end the week on a negative note, marking its fourth week of declines in the previous five.  

Technical levels to watch

A follow-through selling has the potential to continue dragging the metal towards YTD low level of $1238 en-route 200-week SMA support near the $1234 region. On the flip side, the $1247-48 zone now seems to have emerged as an immediate resistance and is followed by $1252-53 supply zone, above which a bout of short-covering could lift the commodity back towards $1260 horizontal resistance.