Gold Price Trends Upwards for Fourth Day, Reaches One-Month High Despite Mixed Market Signals

Posted Friday, July 14, 2023 by
Arslan Butt • 2 min read

The price of GOLD saw a positive trend for the fourth day in a row on Friday, reaching a new one-month high in the Asian market around $1,964. Even though the intraday increase lacks a bullish conviction, acceptance over the 100-day Simple Moving Average (SMA) indicates potential for further extension of the recent upward trend from the $1,893 region, a low seen in the last three and half months.

A weakened US Dollar continues to underpin the price of GOLD , as it remains near its lowest point since April 2022, thanks to expectations that the Federal Reserve might soon halt its policy-tightening cycle. The belief that the Fed will maintain interest rates following the expected 25 basis point hike at its July meeting is gaining traction among investors. This belief is reinforced by recent data showing a further moderation of consumer prices in the US in June. The monthly increase in core prices was also the smallest since August 2021.

Moreover, the US Producer Price Index (PPI) barely rose in June, supporting predictions of a single Fed rate hike this year which further benefits the GOLD price. Unimpressive US monthly employment data released last Friday indicates the economy added the fewest jobs in over two years, potentially leading the Fed to soften its stance. As a result, there’s been a sharp drop in US Treasury bond yields, leading to a weaker USD and supporting the increase in the price of gold.

However, a surprise drop in US Weekly Initial Jobless Claims indicates a tight labor market. Also, hawkish remarks by Fed Governor Christopher Waller have curbed the gold price increase. He suggested two more quarter-point hikes this year. Nevertheless, the current fundamental backdrop still supports a near-term positive outlook for gold prices.

Investors now eagerly await the release of the Preliminary Michigan US Consumer Sentiment Index. The data, in combination with US bond yields, will impact USD price dynamics and provide short-term opportunities for gold price trading. Gold, meanwhile, is on track to finish positively for the second week in a row and could potentially reach its highest weekly close since May.

Looking at the technical aspect, any future uptick could face resistance around the $1,970-$1,972 area, followed by the $1,983-$1,984 zone. Breaking beyond this point could see the gold price reaching the $2,000 mark, aiming for the next hurdle around the $2,010-$2,012 region.

On the other hand, the 100-day SMA, currently near the $1,954-$1,953 area, appears to guard the immediate downside, followed by support around $1,942. If the price falls below this, technical selling could further depress the gold price to around $1,925. Additional selling could push the price towards the $1,900 mark, eventually returning to the multi-month low around the $1,893 region.

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