Gold eased for a third straight day on Wednesday and retested $4000 support, with a firmer dollar keeping the metal on the defensive. Early enthusiasm about diplomacy replacing hostilities in the Middle East faded after fresh attacks by US and Saudi armies on Iraq. Traders now wait on the Fed's July decision and Thursday's US June PCE price index.
Gold eased for a third straight day and retested $4000 support on Wednesday. Initial enthusiasm about diplomatic action replacing hostilities in the Middle East had faded after fresh attacks by US and Saudi armies on Iraq.
The dollar firmed, keeping the yellow metal on the defensive while markets await results from the Fed's policy meeting and comments from Chairman Warsh for more information about the central bank's next steps. The Fed is widely expected to keep rates on hold in the July meeting.
The latest developments in the Middle East warn of fresh pressure on prices if the situation escalates further, which may keep gold at the back foot. That pressure would weigh harder if policymakers show a more hawkish stance today.
Focus will also be on the release of the US June PCE price index, the Fed's preferred inflation gauge, due on Thursday, which would add more details to the inflation picture.
The metal is expected to remain under increased pressure if the Fed hints at more policy tightening, with markets already betting on a rate hike in September.
On the charts, resistance stands at 4077, 4116, 4166 and 4180. Below spot, the support levels run 3960, 3942, 3900 and 3842.
An eventual break below $4000 would trigger fresh acceleration lower.
Source: ActionForex
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