Gold Price Poised for Upside Momentum as US Inflation Softens
The XAU/USD (gold price) encountered resistance around the immediate level of $1,960.00 during the late Asian session, indicating a potential breakthrough.
The XAU/USD ( GOLD price) encountered resistance around the immediate level of $1,960.00 during the late Asian session, indicating a potential breakthrough. Inflationary pressures in the United States have significantly eased, providing encouragement for the Federal Reserve (Fed) to proceed with only one interest rate hike by year-end, thereby supporting the anticipated resumption of the precious metal’s upward trajectory.
Overnight, S&P500 futures recorded substantial gains, reflecting a bullish sentiment in US equities driven by a strong risk appetite. However, the US-500 stock basket may experience some volatility as the second-quarter earnings season approaches.
The US Dollar Index (DXY) has stabilized around 100.50 after a recent decline, as the substantial moderation in the United States Consumer Price Index (CPI) has alleviated concerns of a potential recession. Market participants are eagerly awaiting the US Producer Price Index (PPI) data scheduled for Thursday.
Economists at Commerzbank have noted increasing signs of easing inflationary pressure in the US. Consumer prices in June rose by a modest 0.2% compared to the previous month, with the core rate (excluding energy and food) also increasing by only 0.2%, the smallest rise since February 2021. While the Fed is still expected to raise interest rates at the end of the month, the data support the view that this could potentially be the final hike.
Gold Technical Outlook
In an exciting turn of events, GOLD has successfully broken out of the Inverted Head and Shoulder chart pattern on the four-hour scale, marking a bullish reversal in its trajectory. This breakthrough above the chart pattern’s neckline, situated around the $1,940.00 level, indicates the potential for further upside gains. Gold bulls now set their sights on the next target at the May 19 high of $1,984.25, fueled by the optimistic sentiment. Adding to the positive outlook, the 20-period Exponential Moving Average (EMA) at $1,940.21 is expected to act as a strong support, propelling gold’s upward movement. Moreover, the Relative Strength Index (RSI)has confidently shifted into the bullish range, signifying the initiation of a promising bullish momentum in the gold market.
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