The gold spot price (XAUUSD) has found some momentum as it heads for its biggest monthly gain since April on the back of a softer inflation report on Friday. With speculation rising that major central banks have reached the end of their hiking cycle, the prospects of lower interest rates have propelled the non-yielding bullion as July ends.
On Friday, the US Core PCE Price Index came in at 4.1%, a welcome reduction from the prior 4.6%, surpassing the market’s 4.2% forecast on the downside. After delivering their latest 25bps interest rate hike on Wednesday, it is now firmly believed that the Fed might halt the hiking cycle in September. The CME FedWatch Tool assigned a 79.5% probability of keeping rates steady at 525-550bps in September, which aided the upward momentum, on track to close the month 1.8% higher.
On the 4H chart, an ascending triangle broke down toward the end of July. While a retracement occurred to retest the channel support, it resulted in a double top formation, which tilted the price action toward the bearish side. The resistance of the 50-day moving average at $1,964.88 per ounce and daily pivot point at $1,955.97 per ounce presents additional hurdles to cross for the upward trend to continue.
From the late-July peak, the 38.20% Fibonacci retracement at $1,952.52 per ounce offers support, where a breakdown could shift the momentum toward $1,948.46 (S1) per ounce. A longer-term retracement could result in a test of the Fibonacci midpoint and golden ratio at $1,942.38 and $1,932.23 per ounce, which could prevent the spot price from trickling lower toward $1,927.49 per ounce.
However, if the support at $1,952.52 per ounce sustainably prevents further downside price action, the daily pivot point at $1,955.97 per ounce could be vulnerable to a break toward the 50-day moving average at $1,964.88 per ounce. The psychological resistance in the upside case is established at $1,974.03 (R2) per ounce, a level that previously proved challenging for the upward trend.
While the gold spot price has enjoyed buying momentum on speculation of less restrictive monetary policies, the technical indicators suggest that some near-term downside is possible. If support at $1,952.52 per ounce fails to hold, the price action could move toward $1,948.46 per ounce. However, a sustainable break above the daily pivot point could trigger convergence with the 50-day moving average around $1,964.88 per ounce.
Sources: Koyfin, Tradingview, CME Group.
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