Gold price struggles near YTD low, acceptance below $1,700 to set the stage for further losses

• Gold price oscillated in a range and consolidated the recent downfall to a nearly one-year low.
• The ongoing USD profit-taking slide from a 20-year low, weaker US bond yields offered support.
• Aggressive Fed rate hike bets, a positive risk tone acted as a headwind and capped the upside.

Gold price seesawed between tepid gains/minor losses on Friday and consolidated its recent decline to its lowest level since August 2021. The XAUUSD, however, managed to defend the $1,700 mark through the early North American session, though any meaningful recovery still seems elusive.

Gold price drew support from weaker USD

The US dollar extended the previous day's retracement slide from a two-decade high and edged lower on the last day of the week. Fed Governor Christopher Waller and St. Louis Fed President Jim Bullard - the two most hawkish FOMC members - said that they were not in favour of the bigger rate hike at the upcoming meeting in July. Adding to this, Atlanta Fed President Raphael Bostic noted that moving too dramatically could undermine positive aspects of the economy and add to the uncertainty. This, in turn, continued weighing on the USD and offered some support to the dollar-denominated gold.

Upbeat US macro data failed to impress USD bulls

The US Census Bureau reported that Retail Sales increased by 1% in June as against the 0.8% rise anticipated and the 0.1% fall in the previous month (revised higher from -0.3%). Excluding autos, core retail sales also surpassed estimates and climbed 1% during the reported month, up from the 0.5% increase in May. Separately, the New York Fed's Empire State Manufacturing Index rebounded sharply from -1.2 in June to 11.1 for the current month, beating expectations for a reading of -2. The upbeat data, however, failed to impress the USD bulls or provide any impetus to the gold price.

US Retail Sales historic chart

Aggressive Fed rate hike bets capped XAUUSD

The odds for a 100 bps Fed rate hike move jumped following the release of stronger-than-expected US economic data. It is worth mentioning that Fed Governor Christopher Waller said on Thursday that his decision to back the case for an aggressive rate hike depends on incoming data and specifically cited retail sales as one of the key metrics. This, to a larger extent, helped offset a softer tone surrounding the US Treasury bond yields and continued acting as a headwind for the non-yielding gold.

Positive risk tone also weighed on gold price

A goodish recovery in the risk sentiment - as depicted by a generally positive tone around the equity markets - dented demand for traditional safe-haven assets. This was seen as another factor that contributed to capping the upside for gold price. That said, growing fears about a possible recession should keep a lid on any optimistic move in the markets. This, in turn, warrants some caution for aggressive bearish traders and before positioning for any further depreciating move for the metal.

Gold price technical outlook

Gold price, so far, has struggled to find acceptance below the $1,700 round-figure mark. That said, the metal’s inability to gain any meaningful traction suggests that the near-term selling bias might still be far from being over and risks remain skewed to the downside. Hence, any attempted recovery move is likely to confront resistance near the $1,725-$1,726 region. This is followed by the $1,734-$1,735 horizontal barrier, above which a bout of short-covering could lift the XAUUSD towards the $1,749-$1,752 supply zone.

On the flip side, weakness below the overnight swing low, around the $1,698-$1,697 area, would be seen as a fresh trigger for bearish traders and make the XAUUSD vulnerable. Gold price could then accelerate the fall towards September 2021 low, around the $1,787-$1,786 region. The downward trajectory could further get extended towards testing the 2021 yearly low, near the $1,677-$1,676 area.

Gold price: Top-down analysis on XAUUSD