Recently, the price of gold has mainly between USD1,900 and USD2,000, and investors are paying close attention to the potential direction of interest rates after the Federal Reserve made hawkish comments on policy. In their first comments since the June FOMC decision to keep policy rates at 5 - 5.25% unchanged, Fed officials maintained a hawkish tone. Moreover, the appeal to gold to buyers of other currencies are slightly reduced combined with a firmer U.S. dollar index. In addition, Fed Chairman Jerome Powell has reiterated his hawkish stance in recent testimony, noting that most policymakers support several rate hikes later this year. This also further intensified the hawkish sentiment, leading to a continuous decline in gold prices and limiting the rise in gold prices. 

According to the historical record, gold prices mostly outperform the market when the Fed's tightening cycle is coming to an end. While the opportunity cost of holding gold has risen, real yields are expected to gradually decline, potentially providing support for gold. While gold prices may be suppressed in the short term, gold remains an important safe-haven asset in the long run. Especially when the economy faces uncertainty and market volatility increases, gold prices may return to higher. Therefore, gold is a buying opportunity currently. 

On a technical level, the downward channel on the gold daily chart since the high level in May this year is still very obvious. As the price of gold has weakened in recent trading days, it has now fallen below the previous operating range around 1,940, and the immediate support is around 1,902 - 1907. This level is the 0.618 Fibonacci retracement support level of the rising segment of the daily chart, and then 1,900 is a round psychological level. I personally think that long-term investors may also regard the recent decline as a callback, because if there is a clear trend around 0.618, this can be cited even more. At that time, you can enter the market with a small bet to buy, and the long-term goal is to see the top near 2,067. 

In short, investors remain cautious about sentiment in the gold market and should pay close attention to changes in various policies and economic data, as well as developments in the international situation.

Hugo Leong

Gold Analyst of Hantec Group