The medium and longer-term gold outlook tilts bearish due to a couple of negative catalysts.
the highest reading since 1981, once again exceeding expectations and raising the odds the Fed will continue its aggressive rate-hike regime in a bid to tame spiraling prices. Investors remain on edge as they wait for another rate hike during the FOMC meeting scheduled for July 26-27.
"We think 100 bps will be on the table on July 27, but data on real economic activity in June that were released after we published our forecast make the case for a supersized rate hike less compelling. These data reinforced previously published data that point in the direction of economic deceleration," Wells Fargo has said.
Given how quickly tactical and ETF positioning has been scaled back in recent sessions, we believe gold prices could edge higher if the Fed hikes by 75bps as expected. A steeper hike or a more hawkish tone could, however, pressure prices below the key support level of USD 1,690/oz."That said, the medium and longer-term gold outlook tilts bearish due to a couple of negative catalysts.
First off, the dollar's weakness is not expected to last for long. Indeed, analysts are reluctant to turn bullish on the euro given ongoing concerns about how hawkish the ECB can really be, the ongoing natural gas and energy crisis as well as anemic economic growth amid high inflation.In our view, this bounce is likely to prove short-lived and should provide better entry levels for short euro positions.
" Dominic Bunning, head of European FX Research at HSBC has said. Bunning also notes that ECB's 50 basis points"no longer looks so hawkish" against bigger hikes from the likes of the Fed and the Bank of Canada and that close to 150 bps of ECB hikes in 2022 were already priced in.
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