The Gold Spot Price (XAUUSD) kicked off the week on the back foot, closing 32 basis points lower in Monday’s trading session. The downtrend extended into Tuesday’s session as the yellow metal opened lower after being dragged down in the Asian session.
With inflation data looming, traders will be eyeing the U.S. for signs that could prompt a move from the Federal Reserve. While the U.S. has made significant progress in lowering inflation, the July reading is expected to undo some of the progress. Year-on-year core inflation, which excludes the volatile food and fuel prices, is expected to remain sticky at 4.8%. In contrast, The inflation rate is expected to increase by 30 basis points to 3.3%.
The Gold Spot price is firmly within a downtrend as it continues to retreat further away from its 100-day moving average. A sharp rejection of the 1924.92 level indicates the presence of upside interaction at the level, forming support, while the rapid move lower from the 1954.75 level established a resistance level.
The retracement from the support level was met with a barrier of downside pressure at the 61.80% Fibonacci Retracement Golden ratio on Friday last week, and downside momentum has taken precedence since. If the downside pressures persist, traders could be in contention to see through the spot price towards support at the 1924.92 level. In contrast, the Golden Ratio will likely serve as a level of significance to the upside if momentum sways in favour of bulls.
The yellow metal, which tends to lose favour in high-interest rate periods due to its non-yielding nature, will likely be subdued if U.S. inflation does, in fact, speed up as the market turns to the Greenback on the potential that rates will stay higher for longer. The key level to monitor will be the 1924.92 level for pessimistic yellow metal traders. In comparison, the 1943.35 level will serve as a point of interest for traders optimistic about the yellow metal’s prospects.
Sources: CME, Reuters, TradingView
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