Gold Finds Support, But Can It Resume the Bullish Trend This Week?
The retreat in Gold stopped at the 50 SMA on Friday, and traders are waiting for the FED, the ECB and the BOJ meetings this week
Gold turned quite bullish since the beginning of July, as the USD economic data started showing further weakness in most sectors, and the softer inflation figures from the US earlier this month gave the USD another push lower, which sent Gold on another bullish leg. Since the retrace ended at the end of June, Gold has gained nearly $1000, climbing to $1,989 on Thursday before retreating lower.
Although, in the last two days of last week we saw a decent retreat in Gold, which sent the price dipping below $1,960 briefly. Although the 50 SMA (yellow) held as support on the H4 chart. On the other hand, we didn’t see a strong bounce, which shows that the uncertainty is high, as we approach some major events this week. The volatility is expected to pick up significantly in financial markets, as three major central banks are holding meetings this week, two of which are expected to raise interest rates again, the FED and the ECB.
Starting with the Federal Reserve, the Federal Open Market Committee (FOMC) is anticipated to raise borrowing costs by 25bps, bringing the rates to 5.50%, on Wednesday. But this rate hike has already been factored in by traders, so the main focus will be on the forward guidance provided by the FED.
If they maintain a hawkish stance and hint that further measures are required, it could lead to higher interest rate expectations, which would give the U.S. dollar a massive boost and create a negative environment for GOLD , as well as for risk assets such as commodity dollars.
As for the European Central Bank (ECB), it is also expected to deliver a quarter-point interest rate hike. However, given the deteriorating growth conditions in the Eurozone, the ECB may refrain from committing to further tightening. In this case, the Euro could be at risk of experiencing a sharp bearish reversal.
In addition to the central bank decisions, there are other crucial events on the economic calendar, such as the release of the Q2 US GDP figures and June core personal consumption expenditures (PCE) data. These releases will provide valuable insights into the health of the U.S. economy and the path of inflation. If the results exceed expectations, it may support the case for additional tightening by the Federal Reserve, which would traders to abolish the long positions in Gold.
Gold XAU Live Chart
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