Gold Gains Support at $1,700 – What Could Drive a Bullish Correction?
The gold price oscillated between tepid gains and minor losses, consolidating its recent decline to its lowest level since August 2021.
The gold price oscillated between tepid gains and minor losses, consolidating its recent decline to its lowest level since August 2021. The XAU/USD, on the other hand, managed to hold the $1,700 level through the early North American session, though a meaningful recovery remains elusive.
Gold Price Benefited from a Weaker Dollar
On the final day of the week, the US dollar extended the previous day’s retracement slide from a two-decade high and edged lower. The US Federal Reserve Governor Christopher Waller and Jim Bullard, the two most hawkish FOMC members, stated their opposition to a larger rate hike at the July meeting.
Furthermore, Atlanta Fed President Raphael Bostic stated that moving too quickly could undermine positive aspects of the economy and increase uncertainty. This, in turn, weighed on the USD and provided some support for dollar-denominated gold.
USD Bulls Unimpressed by Upbeat US Macro Data
According to the US Census Bureau, retail sales increased by 1% in June, compared to the 0.8 percent increase expected and the 0.1 percent decline in the previous month (revised higher from -0.3 percent ). Excluding automobiles, core retail sales surpassed expectations and increased by 1% during the reported month, up from 0.5 percent in May.
Separately, the Empire State Manufacturing Index of the New York Fed rose sharply from -1.2 in June to 11.1 in July, exceeding expectations for a reading of -2. However, the upbeat data failed to impress USD bulls or provide any impetus to the gold price.
Aggressive Fed Rate Hike Capped Gold Prices
Following the release of stronger-than-expected US economic data, the odds of a 100 basis point Fed rate hike increased. It is worth noting that Fed Governor Christopher Waller stated on Thursday that his decision to support the case for an aggressive rate hike is contingent on incoming data, citing retail sales as one of the key metrics. To a greater extent, this offset a softer tone surrounding US Treasury bond yields and acted as a headwind for non-yielding gold XAU/USD.
Positive Risk Sentiment Weighed on Gold Prices
As evidenced by a generally positive tone in the equity markets, a modest improvement in risk sentiment reduced demand for traditional safe-haven assets. This was viewed as another factor that contributed to the gold price’s upside is limited.
However, growing concerns about a possible recession should keep any positive market movement in check. As a result, aggressive bearish traders should exercise caution before positioning for any further depreciation of the metal.
Gold Technical Outlook
Gold price found solid support at the 1700.00 barriers, indicating a slightly bullish bias, aided by stochastic positivity. At the same time, the EMA50 continues to press negatively on the price, keeping the bearish trend scenario effective for the coming periods, waiting to surpass the mentioned level to head towards 1650.00 as the next target.
Breaking 1690.00 will make it easier to reach the mentioned target, while the price must remain below 1740.00 to ensure the continuation of the suggested bearish wave. Today’s trading range is expected to be between 1685.00 support and 1725.00 resistance.
Today’s expected trend is bearish.
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