Gold price recovers as bulls on the US dollar pause.
The price of gold is following the movements seen on US Consumer Price Index (CPI) day in the first half of Wednesday. The buyers of the US dollar (USD) pause while they wait for important US inflation statistics to provide new direction.
All eyes are on the figures from the United States Consumer Price Index.
As a result, the price of gold is trying once more to rise from its four-week low of $1,914 on early Thursday. Markets trade cautiously as a result of the mixed tone. In the Asian indices, despite the fact that the US S&P 500 futures experience modest gains. Prior to the release of the crucial US CPI inflation statistics. Which will have a substantial impact on the US Federal Reserve’s (Fed) policy course. Investors turn to altering their US Dollar positions.
In contrast to the 3% increase reported in June. The US annual headline CPI is forecast to grow by 3.3% in July. Inflation in the Core CPI is anticipated to remain at 4.8% YoY in the reporting period. Both the headline and Core inflation rates are anticipated to remain at 0.2% per month.
Money markets are pricing 86.5% odds. That the Fed would halt its tightening cycle at the September meeting while anticipating the next action to be a cut. Most likely in the spring, according to CME Group’s FedWatch Tool. A positive surprise in the headline and core CPI figures might rekindle hopes of a Fed rate hike. Bringing the US dollar and US Treasury bond yields back up. Hot US inflation data is probably going to make the gold price even worse and set the stage for a test of the levels below $1,900.
Despite worries about the US-China relationship and China’s economic growth, investors maintain their caution.
On Wednesday, following an initial dip, the greenback leaped back onto the bidding. After US traders sat down and responded badly to China’s deflation statistics. Risk sentiment soured, driving up demand for safe haven assets like the US Dollar. At the expense of gold prices. While slightly better than the -0.4% projected, China’s CPI showed its first dip since February 2021 in July, falling by 0.3% from a year earlier. The Producer Price Index (PPI) for China decreased for the tenth consecutive month.
After US President Joe Biden signed the eagerly awaited law allowing the US Treasury Department to prohibit or restrict certain US investments in Chinese technology companies engaged in semiconductors and microelectronics, quantum information technologies, and certain Artificial Intelligence (AI) systems, risk aversion increased as US tech stocks fell.
Gold Technical analysis
Technically, despite the recent rally. The price of gold continues to be vulnerable to downside threats because the 14-day Relative Strength Index (RSI) is still holding below the midline.
A high US inflation report will rekindle selling activity in gold, pushing the price through crucial support near $1,910. And into the crucial $1,900 200-Daily Moving Average (DMA) zone. The $1,883 low set on June 29 will be put to the test if the latter is broken consistently below.
Only the unfavorable US CPI data may save gold purchasers from monthly lows, and even then, the recovery was anticipated to hit a roadblock around the round $1,930 mark, above which the 50-DMA’s downward slope at $1,944 might be threatened.The psychological level of $1,950 is considered to be the next important upward barrier.
