Gold pressured by stronger US dollar

Precious metals have generally maintained the same defensive stance, with gold reaching two-month lows and silver at two-year lows.

Risk aversion dominates Tuesday’s trading session as investors await clues that will be provided by June’s US CPI report, due on Wednesday. Gold price is slanted to the downside and might test $1700; otherwise, a correction towards $1750 could be displayed.

Gold declined during Tuesday’s North American session due to risk-aversion, courtesy of China’s coronavirus reemergence which is fueling investors’ worries., the EU’s energy crisis, and recession fears. That usually lifts the precious metal price, though haven flows are going towards the US dollar and US Treasury bonds, as US bond yields are generally falling.

Gold declines on a firm US dollar, the negative market sentiment, and on ETF’s outflows. The Gold Index is trading at around $1731 per ounce after seesawing between the highs and lows of the day during the Asian session. Gold recorded its low around $1722, followed by a rally towards the daily high near $1744, and then gold’s price stayed range-bound within the $1728-1740 for the rest of the day.

Market sentiment is still negative as traders brace for the US inflation report on Wednesday. A day later, prices paid by producers would shed some light on raw materials and commodity prices and could be an introduction to what could happen during the second quarter’s earnings season. The White House expressed that the new CPI would be elevated.

The stronger US dollar is not the only reason weighing on lower gold prices but also the ongoing and solid ETF outflows. The gold ETFs tracked by Bloomberg registered outflows of 29 tons last week, their most pronounced in eight weeks and the fourth week in a row, with growing momentum.

Speculative financial investors have likewise been withdrawing further from the gold of late. According to the CFTC’s statistics, their net long positions are at their lowest level in over three years,” Commerzbank analysts wrote.

Investors are awaiting the US Consumer Price Index and the Beige Book on Wednesday, followed by Thursday’s PPI and Initial Jobless Claims. On Friday, the University of Michigan Consumer Sentiment could be again the spotlight ahead of the Federal Reserve July meeting.

The Gold Index is downward biased, despite remaining in choppy trading conditions, as sellers cannot challenge the $1700 figure.