Gold Monthly Forecast – July 2018

A higher value of US Greenback makes it harder for investors to choose dollar-denominated precious metals as no interest or gains are made from holding Gold over long-term which results in Gold being viewed of costly investment option with zero gains thereby losing its luster.

The first week of June 2018 saw XAUUSD hold steady above $1289 handle, albeit capped under $1305 handle over strong US Greenback.

Gold Under Huge Pressure

US Dollar received positive influence as the conflict in Italian political climate came to an end and upbeat US macroeconomic data. However, as news related to President Trump’s decision on imposing tariff over Steel and Aluminum import from Europe, Canada & Mexico hit market trade war woes caused demand for Gold to spike resulting in the pair moving above $1300 handle. The weekend saw G7 summit which was to be held in Canada and anticipation over Trump’s participation as President Trump’s “America First” attitude was expected to create problems among allies during G7 summit which caused XAUUSD pair to remain above $1300 as the trading session closed for the first week.

The second week of June saw highly volatile market owing to President Trump’s actions on G7 summit over the weekend, U.S-N.Korean meet in Singapore and Central bank policy meet on both sides of Atlantic Ocean occurred back to back. President Trump lashed out against allies in the G7 summit and left the meeting in Quebec mid-way. He also called Canadian Prime Minister Justin Tredeau “weak & dishonest” in twitter receiving angry comments from allies.

As Trump headed to Singapore for N.Korean summit immediately after causing an issue in G7 summit, investors took to a cautious stance as a wrong move in the meeting could have triggered another war and this resulted in XAUUSD pair maintain a stable bullish movement reaching as high as $1305 price handle. However US-North Korean meet ended on positive note causing risk appetite to soar in the market and US Greenback gained strength which resulted in the pair seeing the slight bearish influence.

US Greenback continued to gain strength in the latter half of the week as US Fed raised the interest rate and ECB commenting no rate hike till summer of 2019 which pushed US Greenback higher against global currencies in the broad market resulting in increased selling activity around XAUUSD pair. However news of US President Trump’s decision to talk with his advisors over imposing tariff on import of Chinese goods worth billions of dollars caused trade war woes to reach new highs resulting in XAUUSD reaching monthly high of $1309.52, however, this move was short-lived as Dollar gained strength against major counterparts over influence from prospect of multiple rate hikes by US Fed within 2018 and saw a steep decline as trading session closed for the second week.

The third week of June saw XAUUSD pair continue to move in bearish trend as positive macro data and spike in US Treasury yields supported US Greenback. US dollar also gained positive momentum post positive comments from Fed Chair Jerome Powell which resulted in the pair moving as low as $1262.46. The fourth week of June saw bearish price action of XAUUSD pair continue hitting new 2018 low at $1265.84.

Forecast

Despite mixed macro data in the USA, XAUUSD pair continued to decline as investors either choose to invest in currency safe havens or move to US Greenback which resulted in firm US dollar and lack of appetite for precious metals resulting in increased selling activity around Gold. The overall decline for June 2018 is at 3.6% making this month’s price action the worst bearish movement since November 2016.

US Greenback has hawkish outlook in long-term and near future market provides highly volatile investment opportunities for investors with risk appetite resulting in dovish predictions for XAUUSD.  The pair is expected to continue its decline until it hits strong support at $1245/40 price range during the first week of July 2018.