Gold is maintaining solid gains above $1,950, having recovered strongly from six-day lows early Tuesday. The US Dollar’s (USD) rise is losing pace as risk sentiment remains favorable on expectations of China’s stimulus package.
China’s stimulus vow boosts gold prices.
On Monday, China’s top leaders committed to increase policy assistance for the economy in the face of a sluggish post-COVID recovery. With Chinese state media speculating on rate drops, tax cuts, and fee reductions by the authorities. Stocks in the Mainland Hong Kong and China rose on stimulus expectations. Helping to halt the recent rally in the US Dollar against its main counterparts.
The improved risk sentiment is pulling the safe-haven US Dollar down, helping the USD-denominated gold price. The continuing weakening in US Treasury note yields. Throughout the curve is also contributing to the gloomy mood around the greenback. Should Chinese authorities announce further stimulus measures to encourage development in the next day. The US Dollar is expected to prolong its corrective move lower as risk flows build momentum. As a result, the gold price may continue to rise ahead of the mid-tier United States Conference Board Consumer Sentiment report.
As a result of weak US mood data, the US Dollar may face renewed selling interest. support dovish views for the US Federal Reserve (Fed). Markets expect the July Fed rate rise to be the final one of the year.
On Monday, the gold price failed to hold its rebound and fell back into the red as the ongoing US Dollar advance gained strength on mounting fears of a global recession following preliminary Eurozone and German business PMI reports indicating an extended downturn. Markets were also underwhelmed by the S&P Global US preliminary Composite PMI for July, adding to growth fears.
Technical analysis
As previously said, gold is experiencing a ‘dip-buying’ trade early Tuesday, having found new buyers just above the important support region of $1,950.
Buyers of gold must Acceptance above the 100-Daily Moving Average (DMA) support-turned-resistance at $1,963 on a daily closing basis is required to prolong the recovery from six-day lows.
The next upside resistance level is around $1,970, over which the May 24 high of $1,985 might be in play. The $2,000 mark will stay on gold purchasers’ radars.
The 14-day Relative Strength Index (RSI) has turned upward while above the midline, indicating an overbought condition, lending confidence to the bullish potential.
On the downside, the bearish 50 DMA of $1,947 provides significant support. A sustained break below the latter will put bullish commitments at the upwardly sloping 21 DMA of $1,940 in jeopardy.
If the selling pressure increases, the gold price may fall toward the $1,930 round number.
