A Little Lower In Asia

Gold sits ~$2/oz weaker at typing to print ~$1,725/oz, rising off session lows as nominal U.S. Tsy yields have come off of their earlier highs. The precious metal has struggled to rise above neutral levels in Asia after closing firmer for the first week in six last Friday, with that move higher aided by a pullback in Fed rate hike expectations from their mid-July, U.S. CPI-inspired extremes.

• To recap, gold initially surged to one-week highs on Friday (at $1,739.3/oz) after the U.S. services flash PMI printed below expectations (while also entering contractionary territory), before paring gains to close ~$10/oz higher.
• Gold however remains on track for a fourth straight monthly loss, with well-documented recession-related worry (particularly in the U.S. and Europe) countered by expectations of Fed hawkishness amidst persistently high inflation, and the USD (DXY) continuing to operate at historically elevated levels.
• July FOMC dated OIS now price in ~82bp of tightening for that meeting (off its mid-July peak ~93bp), pointing to ~30% odds of a 100bp move, while a cumulative ~181bp is priced in through to Dec ‘22 (against >210bp on Jul 14).
• From a technical perspective, gold’s move higher on Friday approached initial resistance at $1,745.4/oz (Jul 13 high). A breach of that level would expose further resistance at ~$1,764.0/oz (20-Day EMA), while on the downside, initial support is situated at $1,697.7 (Jul 14 low).