Gold Price Extends Rebound as Weaker US Dollar Boosts Momentum
Gold price builds on its recent recovery from around the $1,900 mark and continues to climb higher during the Asian session on Wednesday.
GOLD price builds on its recent recovery from around the $1,900 mark and continues to climb higher during the Asian session on Wednesday. The XAU/USD pair reaches a three-week high, approaching the $1,940 region, benefiting from sustained selling pressure on the US Dollar (USD).
Weaker US Dollar supports Gold price:
The US Dollar Index (DXY), which measures the Greenback against a basket of currencies, drops to a two-month low amid speculations that the Federal Reserve (Fed) is nearing the end of its current rate-hiking cycle. This development encourages investors to seek refuge in Gold as a US Dollar-denominated asset. Market participants increasingly believe that the Fed’s room for further monetary tightening is limited, given signs of a cooling US labor market and expectations for a slowdown in consumer price growth.
Declining US bond yields add to XAU/USD support:
Notably, the latest US monthly employment data released on Friday showed the weakest job additions in 2.5 years. Additionally, the New York Fed’s monthly survey revealed a drop in one-year consumer inflation expectations to the lowest level since April 2021, reaching 3.8% in June compared to 4.1% the previous month. These factors contribute to a decline in US Treasury bond yields, undermining the US Dollar and benefiting Gold, which does not yield interest.
Gold price poised for further gains:
Wednesday’s positive move propels XAU/USD above the $1,935 resistance zone, setting the stage for potential further appreciation. However, traders may exercise caution and await the release of the latest US consumer inflation figures, scheduled for the early North American session. This crucial report could impact the Fed’s future rate-hike trajectory, influencing near-term USD demand and providing significant impetus for Gold price movement.
The technical outlook for Gold price:
From a technical standpoint, any subsequent upward movement is likely to face strong resistance near the 100-day Simple Moving Average (SMA) around the $1,950 level. This level is closely followed by the $1,962-$1,964 hurdle, which, if decisively cleared, could trigger a short-covering rally, pushing GOLD price beyond the $1,970-$1,972 supply zone and potentially targeting the psychological $2,000 mark.
On the downside, the $1,935 resistance-turned-support level serves as immediate protection, followed by the horizontal support at $1,925 and the weekly low around $1,912. Failure to hold these support levels may lead to a decline back towards the $1,900 mark, potentially retesting the multi-month low in the $1,893-$1,892 region reached in June. A convincing break below this level would signal a fresh bearish signal.
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