Gold prices fell for the third day in a row and retested the all-important support at $4,000 on Wednesday, as initial enthusiasm over diplomatic action that would replace hostilities in the Middle East faded after new attacks by the US and Saudi militaries on Iraq.
The dollar rose, keeping the yellow metal on the defensive, as markets await the results of the Fed’s policy meeting and comments from Chairman Warsh, for more information on the central bank’s next steps, as the Fed is widely expected to keep interest rates unchanged at its July meeting.
The latest developments in the Middle East herald new pressures on prices (if the situation escalates further) which could keep gold on the defensive, especially if policymakers show a tougher stance today.
Focus will also be on the June release of the US PCE price index (the Fed’s preferred measure of inflation), due on Thursday, which will add more detail to the inflation picture.
Overall, the metal is expected to remain under increasing pressure, especially if the Fed hints at further policy tightening (markets are already betting on a rate hike in September), with an eventual drop below $4,000 to spur a fresh downward acceleration.
Accuracy: 4077; 4116; 4166; 4180
sip: 3960; 3942; 3900; 3842
