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Market Analysis

While traders anticipate this week's US inflation data, the gold market is unsure of its immediate trajectory
Amos Simanungkalit · 149.6K Views

14

Gold (XAU/USD) is facing difficulty maintaining momentum after a recent bounce from the $2,485 support level, encountering some selling pressure on Tuesday. Despite this, the commodity remains above the $2,500 psychological threshold early in the European session, as traders appear cautious ahead of key US inflation data this week. The US Consumer Price Index (CPI) is set to be released on Wednesday, followed by the Producer Price Index (PPI) on Thursday. These figures are expected to impact market expectations regarding the Federal Reserve’s (Fed) upcoming rate cut decision and could provide new direction for gold.

As the crucial data approaches, the US Dollar (USD) has edged closer to its monthly peak reached last week, driven by reduced expectations for a substantial Fed rate cut in September. This, combined with stable global equity markets, is exerting downward pressure on gold prices. Despite recent declines, XAU/USD remains within a well-established range observed over the past three weeks, reflecting trader indecision about the near-term direction. It may be wise to wait for a decisive downward movement before considering any further declines from the recent high set after a mixed US jobs report last Friday.

Technical Outlook: Gold Needs to Break Above $2,530-$2,532 to Regain Momentum

Technically, the price action over the last three weeks has formed a rectangle pattern on the daily chart, suggesting a bullish consolidation phase following the recent all-time highs. Oscillators on the daily chart remain positive, supporting a near-term bullish outlook. However, it is advisable to wait for a clear breakout above the $2,530-$2,532 resistance before positioning for further gains.

Conversely, a significant decline may find support around $2,485, with additional support near the $2,470 level, which marks the lower boundary of the current trading range. A decisive breach of this support could trigger technical selling and lead to deeper losses. Gold prices might then test the 50-day Simple Moving Average (SMA) support near $2,446, with potential further declines towards the $2,410-$2,400 range.

 

 

 

 

Paraphrasing text from "FX Street" all rights reserved by the original author.

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