- The US Federal Reserve still abandoned the tightening policy temporarily, as it kept the US interest rate unchanged last week.
- This is negatively affecting the US dollar, and in return positively for the price of XAU/USD, which jumped to the $1968 resistance level.
- The pair recovered from gold sales that pushed it towards the support level of 1926 dollars an ounce, its lowest in three months.
- Trading started this week stable around the level of 1958 dollars an ounce.
Quiet trading is expected today in light of an American holiday, before investors’ attention returns again this week in light of the anticipation of the testimony of US Central Bank Governor Jerome Powell.
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All in all, gold's recent slide appears to be bottoming out, despite the Fed's continued aggressive tightening. In recent weeks, the yellow metal has consolidated higher, defying aggressive Fedspeak, another big surprise on the upside for US jobs, and hawkish price expectations from top Fed officials. This resilience driving directly into the major seasonal decline in the summer gold slump coincides with speculators maintaining really bullish gold futures positions.
Gold had a strong rally in early May, posting an impressive 26.3% gain in 7.2 months. But after a rapid rise to $2050 an ounce and challenging all-time record nominal highs, the gold price was already expanding. It traded at 1,132 times its 200-day moving average, and gold was overbought. While still under the Deadly Danger Zone up, a health drop was in order to rebalance Morale.
That is exactly what happened over the last several weeks. As the price of gold fell 5.4% to $1,941, with very hawkish statements from senior Federal Reserve officials playing a big role. While the sharpness and magnitude of this mid-calf dip was normal, it quickly eliminated excessive greed. Herd psychology slipped back to the downside, as traders quickly forgot about the strong gold influence that led to it. Gold fell increasingly.
Over the several weeks since the initial sell-off, gold has stalled sideways. That was a consolidation high, in the middle of the top of the bullish gold trading range. The technical damage of this decline was therefore very slight, and certainly does not justify such pessimistic sentiments. But the downside and apathy are par for the course in the weakest seasonal season of the year for gold, the dreaded summer slump. Earlier this week, the US Federal Reserve Committee voted to keep the US benchmark interest rate unchanged at 5.25% in line with expectations. However, interest rate expectations for the current year have now risen to 5.6% from 5.1% in the previous update, while those for years one and two have increased to 4.6% and 3.4% respectively from 4.3% and 3.1%. The long-term interest rate forecast remained unchanged at 2.5%.
Technical analysis of gold prices XAU/USD:
In the near term, and according to the performance on the hourly chart, it appears that the XAU/USD gold price is trading within a bullish channel formation. This indicates a significant short-term bullish bias in market sentiment. Therefore, the bulls will look to extend the current gains towards $1966 or higher to the $1978 resistance an ounce. On the other hand, the bears will look to pounce on pullbacks around $1945 or lower at $1933 support.
On the long term, and according to the performance on the daily chart, it appears that XAU/USD is trading within a sideways channel formation after completing the double top reversal pattern. This indicates that the bulls are trying to prevent the bears from controlling the price. Therefore, the bears will be looking for a break-down at around $1.915 or lower at $1872 an ounce. On the other hand, the bulls will target long-term profits at around $1992 or higher at $2033 an ounce.
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