Upon analyzing the XAU/USD chart, it is evident that the price of gold experienced a significant increase above the $2390 level on Friday, July 5th. However, this rise was short-lived as the price fell back to $2360 per ounce on Monday. This inconsistency in market behavior suggests a lack of sustained bullish momentum, signaling a potential bearish trend in the near future.
From a technical analysis perspective, the gold market has shown clear support around the $2300 area. Historical data indicates that whenever the price dipped below this level in June, it quickly rebounded, underscoring strong demand. Additionally, a descending channel can be identified based on price action since April, with the recent bearish reversal pushing the price back within this channel. The presence of seller activity in the $2380-2400 range further supports the possibility of a continued decline towards the crucial support level at $2300.
The upcoming testimony by Jerome Powell, the head of the Federal Reserve, is expected to have a significant impact on the gold market. Powell is scheduled to appear before Congress, starting with the Senate on Tuesday and the House of Representatives on Wednesday. Any indications of weakness in the US economy during his testimony could serve as a positive catalyst for the gold price.
If Powell implies the need for a potential interest rate cut in the near future, it could bolster expectations of a rate adjustment in September. Currently, the probability of a September rate cut stands at 77%, according to CME’s FedWatch Tool. In a low-interest-rate environment, the appeal of non-yielding assets like gold tends to increase, making it a preferred choice for investors seeking stability and value preservation.
The recent price movements and technical indicators point towards a possible decline in the gold price in the coming days. While short-term fluctuations are inevitable in the market, the underlying trends and external influences suggest a bearish outlook for gold. Traders and investors should closely monitor Powell’s testimony and its implications on the US economy to make informed decisions regarding their gold investments.
It is essential to practice caution and conduct thorough analysis before making any trading decisions, especially in volatile markets like gold. By staying informed about market developments and macroeconomic factors, traders can better navigate the uncertainties and capitalize on potential opportunities presented by the gold market.
Leave a Reply