In the European session on Thursday, the price of gold (XAU/USD) hovered around the $2,300 mark, showing little recovery momentum from its recent dip to two-week lows. The market sentiment remains influenced by the Federal Reserve’s recent hawkish shift following its June meeting. The central bank’s stance, leaning towards a potential single interest rate hike by year-end, has bolstered US Treasury bond yields, posing a challenge for gold, which does not offer yield.
However, hopes for a Federal Reserve interest rate cut in September persist amid signs of easing inflationary pressures in the US. This expectation has failed to bolster the US Dollar (USD) following its recent gains, while factors such as cautious equity markets, ongoing geopolitical tensions, and political uncertainties have provided some support to gold as a safe-haven asset. Traders are also awaiting key US economic data, particularly the US Personal Consumption Expenditures (PCE) Price Index due on Friday.
Technical Outlook: Gold Price Faces Bearish Pressure
Technically, gold has managed to hold above the crucial $2,285 support level, but analysts caution against premature optimism. The failure to sustain momentum above the 50-day Simple Moving Average (SMA) and the breach of a short-term ascending trend-line near $2,314 signal a bearish tilt in the near term. Negative momentum indicators on the daily chart suggest potential further downside, with a break below $2,285 likely to push the price towards the 100-day SMA support around $2,250. A deeper decline could see gold testing the $2,225-2,220 zone before potentially dropping to the psychological $2,200 mark.
Conversely, any recovery attempts are likely to encounter resistance near the $2,314-2,315 area. A sustained breakout above this level could trigger short-covering and lift the price towards the 50-day SMA at $2,338-2,340. Further bullish momentum might aim for the $2,360-2,365 supply zone, with a decisive move above potentially erasing the current negative bias. In such a scenario, bullish traders could target the $2,400 level and even challenge the all-time high near $2,450 reached in May.
In summary, while the gold market navigates near recent lows amidst Federal Reserve policy speculations and economic uncertainties, technical indicators suggest a cautious outlook with potential for both downside continuation and bullish reversals depending on upcoming economic data and market sentiment shifts.
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