August 13, 2023 (MLN): The current short-term technical indicators for international spot gold (XAU/USD) are indicating a "Sell" stance.
The bias will remain tilted towards the downside, unless there's a reclaim of $1,928-1,935. Such a move would create an opening for a potential retest of the primary resistance level at $1,974.
While on the downside, it needs to fall below the strong support level of $1898 for further losses.
XAU/USD Daily time-frame chart:
| Support Levels | ||
|---|---|---|
| $1,898 | $1,860 | $1,802 |
| S1 | S2 | S3 |
| Resistance Levels | ||
|---|---|---|
| $1,928 | $1,974 | $2,300 |
| R1 | R2 | R3 |
XAU/USD Weekly time-frame chart:
In the last gold's analysis on June 17, 2023, it was clearly mentioned how the $1,974 level was a strong resistance.
Quoting the previous article – "However, gold is approaching the key resistance level of $1975, and the price action around this level will indicate the current state of the market.
This level has remained very crucial, with it also being range high since 2020."
As can be seen from the chart above, gold rejected off this resistance which was a sign of weakness, and an indication to exit long positions.
The next pivotal point is $1,898 which is a very strong support, for short positions, a break and acceptance below this level will be the key.
US Fed, Inflation and Gold
The trajectory of gold remains closely tied to US interest rates and inflationary pressures.
The U.S. consumer price index (CPI) for the month of July 2023 came in at 3.2% YoY, slightly higher than 3% YoY in June. However, it was softer than the analysts’ estimates of 3.3%, showing a moderation in the inflationary momentum in the world’s largest economy.
Note: Inflation rose for the first time in 12 months
Presently, market participants are putting in just a 10% probability of a rate hike in September.
However, it is noteworthy that core inflation remains sticky, marking a 4.7% YoY increase in July. This indicates that the Fed's job is not done yet, and it remains far from achieving its 2% target, thereby maintaining the possibility of an additional rate hike in September.
Meanwhile, the Chinese economy slipped officially into deflation as the Consumer Price Index (CPI) declined by 0.3% YoY in July.
Until there is a positive shift in global economic conditions, the demand for the US Dollar is anticipated to remain high, leading to reduced attractiveness of gold.
Furthermore, a strong US Dollar makes other currencies lose their appeal, thereby increasing the cost of gold for individuals holding different currencies, given its denomination in US dollars.
Disclaimer: The opinions in this article are the author’s and do not necessarily represent the views of Mettis Link News (MLN). Nothing in this article should be considered the sole basis for making financial decisions.
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Posted on:2023-08-14T07:58:30+05:00
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