Last week gold broke below support of $1,786 and had experienced its biggest selloff since May, slipping more than 4%. The primary force behind gold’s decline has been the strength in the U.S. dollar which gained more than 2% over the past week. Gold has been facing some significant headwinds since March with the price declining from a high of $2,070 to a low of $1,732 last Friday. The biggest hurdle the precious metal faces is that the Federal Reserve will continue to aggressively raise interest rates.

According to the CME’s FedWatch Tool, there is a 93% probability that the Federal Reserve will raise interest rates once again by 75 basis points later this month. These expectations have driven the U.S. dollar to a 20-year high and pushed bond yields back above 3%. After Friday’s NFP report showed the U.S. economy has created 372K jobs in June, beating expectations for 250K, recessionary fears have eased and there is not much stopping the Fed to combat inflation, which many fear could become entrenched.



The selling pressure has eased over the past three days and the price of gold has been trading in a narrow range between $1,732 and $1,752. Short-term traders should monitor the range and open a position in the direction of the breakout. A break above minor resistance of $1,752 could trigger a rally to $1,772, while a break below minor support of $1,732 would signal an extension of the prior down swing with a possible downside target of $1,720.