Gold price stabilizes as Fed likely to resume interest-rate hiking cycle in July

• Gold price trades directionless around $1,960.00 as investors await Fed policy for further guidance.
• One more interest- rate hike from the Fed is widely expected to return the United States' stubborn inflation to 2%.
• Diverging views among Fed officials and investors about interest-rate guidance likely to keep the US Dollar Index on edge.

Gold price (XAU/USD) is portraying a non-direction performance on Monday as investors await the interest-rate decision by the Federal Reserve (Fed) for further guidance. The precious metal is expected to continue its lackluster performance as a small interest-rate hike from the Fed is widely expected despite softening inflation and loosening labor market conditions.

There is little doubt among investors that the Fed will increase interest rates to the 5.25-5.50% range as the core Consumer Price Index (CPI) is still stubbornly high partly due to the resilience in consumer spending. A catalyst to which investors are keeping an eye is the interest-rate guidance from the Fed. Fed officials and investors have divergent views about where interest rates will peak for the current year as the former signaled that two more interest-rate hikes are appropriate while market participants are expecting that the upcoming interest-rate increase will be the last one this year.

Daily Digest Market Movers: Gold price remains sideways ahead of Fed policy

• Gold price struggles to maintain an auction above $1,960.00 as investors prepare for a fresh interest-rate hiking cycle by global central banks.
• The Federal Reserve, the European Central Bank (ECB), and the Bank of England (BoE) are set to raise interest rates further to tame stubborn inflation.
• Investors are anticipating 25 basis points (bps) interest-rate hike from the ECB but are mixed about the scale of policy tightening by the BoE.
• Headline inflation in the United States softened in June due to lower gasoline prices while core inflation is still stubborn due to expanding consumer spending, boosting hopes of one more interest-rate hike from the Fed.
• It is widely expected that the Fed will raise interest rates by 25 bps to 5.25-5.50%, according to the CME Group FedWatch tool.
• Fed Chair Jerome Powell skipped its aggressive rate-hike cycle in June to buy some time to assess the impact of interest-rate hikes in the past 17 months.
• As the Fed looks set to raise interest rates further in July, investors’ major focus will be on guidance for the entire year.
• Jerome Powell announced in his testimony that two more interest rate hikes are appropriate by the year-end.
• Contrary to Powell’s commentary, investors are hoping that July’s rate hike would be the last nail in the coffin. Also, Goldman Sachs cited that the Federal Reserve's widely-expected interest- rate hike at its upcoming policy meeting next week will be "the last" of the US central bank's current tightening cycle.
• The Fed is not expected to discuss rate cuts for this year as the foremost priority is to bring down inflation to 2% and its consistent maintenance around desired levels.
• Meanwhile, US S&P preliminary PMI data for July will be keenly watched. Manufacturing PMI is seen improving marginally to 46.4 vs. the former release of 46.3. This would be the second straight in factory activity as the figure would be below 50.0. Services PMI is seen lower at 54.1 against the former release of 54.4.
• US factory activity has remained weak amid aggressive policy-tightening by the Fed and tight credit conditions at commercial banks.
• The upside in the US Dollar Index seems restricted to around 101.00 as an interest-rate hike of 25 bps from the Fed is widely anticipated. Meanwhile, 10-year US Treasury Yields have jumped to 3.85%.

Technical Analysis: Gold price eyes further correction to 20-EMA

Gold price juggles in a narrow range after a three-day correction from the immediate high of $1,984.00. A mean-reversion is expected in the precious metal toward the 20-period Exponential Moving Average (EMA) around $1,950.00. The yellow metal is under pressure due to a decent recovery in the US Dollar Index.

Momentum oscillators show that the upside impulse has faded. However, the north-side bias looks still solid.