The price of gold fell after four consecutive weeks of gains as investors assessed the outlook for the hawkish path of the Federal Reserve and on further indications that China is struggling to recover. The price of XAU/USD gold declined at the beginning of this week's trading, towards the support level of 1773 dollars for an ounce, starting from the psychological resistance of 1800 dollars. The price of gold is stable around the level of 1780 dollars at the time of writing the analysis.
Gold bullion prices fell, after the longest streak of weekly gains in nearly a year. The price of the precious metal has risen amid slowing inflation in the US, supporting the argument that the Fed is less aggressive in raising borrowing costs. China's central bank unexpectedly cut its key interest rate as it ramped up its support for an economy wracked by virus lockdowns and a deepening property crisis.
Economic data released on Monday showed that the country's recovery is faltering, which could lead to a decline in physical demand for gold in the world's largest consumer.
Investors will look forward to the release of the minutes of the Federal Reserve's July meeting on Wednesday, which may provide clues to conditions that could push the US central bank to tighten again in September. Bets in the financial markets on the size of the next increase ranged between 50 and 75 basis points. Richmond Fed President Thomas Barkin said Friday that the US central bank needs to keep raising interest rates until inflation is on track with its 2% target, even if the economy weakens, to avoid a policy error similar to the 1970s.
How will inflation affect gold?
Inflation in the US is likely to remain elevated in the fourth quarter, which could lead to some headwinds in the near term for gold, although the worst is likely over, said Yeap Jun Rong, market analyst at IG Asia Pte. "Today's drop could be due to some profit-taking as markets may have already largely priced the inflation-peak narrative."
Investors are also watching a two-day visit by a US congressional delegation to Taiwan, which risks keeping tensions with China high after House Speaker Nancy Pelosi's visit earlier this month.
Gold price forecast today:
Despite the recent sales, the price of gold can still rise.
- Stability above the resistance of $ 1780 an ounce supports the movement of the bulls towards the psychological resistance of $ 1800 an ounce, which supports the upward trend of the XAU/USD price.
- The continuation of the current selling operations may push the price of gold towards new buying levels and the closest to it currently 1760 and 1745 dollars, respectively.
- We prefer buying gold from every bearish level, despite the tendency of global central banks to tighten their policy, which is negative for gold.
- It finds momentum from the increase in global geopolitical tensions.
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