Daily Price Outlook
Despite concerns about China's economy and global tensions, the price of Gold (XAU/USD) continued its decline on Monday, reaching around $1,910. This marks its lowest point since July 7. However, the reason for this downward trend can be attributed to the bullish US dollar. The broad-based US dollar has been gaining traction due to expectations that the Federal Reserve (Fed) might soon tighten its rules. Thus, this shift is making the US dollar more appealing to investors. Hence, the appeal of gold diminishes as the dollar performs well. As a result, the price of Gold is currently experiencing a decline.
Geopolitical Factors Impacting XAU/USD Price
Apart from this, turning our attention to the global situation, worries are increasing due to recent circumstances in China and Russia. It is worth noting that the company called Country Garden has stopped trading bonds, while a part of the Zhongzhi Enterprise Group is facing difficulties in making payments. These issues are making China's debt problems even more serious.
Moreover, Russia's plan to fit new nuclear submarines with super-fast missiles, known as hypersonic missiles, and the ongoing tensions between the United States and China in terms of trade are adding to the anxious environment. All of this uncertainty is making people more careful about taking risks.
Therefore, the troubling reports coming in from China have left investors feeling uncertain. This uncertainty has led more people to seek shelter in the US dollar, considered a safer investment choice. Moreover, worries about geopolitical tensions involving Russia are causing a decrease in interest toward riskier investments. This combination of factors has caused the US Dollar steadily climb for four consecutive weeks.
Fed Policy Expectations and US Dollar's Impact on Gold
The broad-based US Dollar has reached its highest point in six weeks, driven by expectations of stricter policies from the Federal Reserve (Fed). The most recent figures for the US Producer Price Index (PPI) have further supported these expectations, showing a slightly larger increase in July than what was anticipated.
Despite a modest uptick in consumer prices, the challenge of reaching the Fed's 2% inflation target is still evident. This situation leaves room for the possibility of the Fed raising interest rates by another 0.25% later this year, which in turn pushes up yields on US Treasury bonds. As a result, the US Dollar has become stronger, leading to a decrease in the price of Gold when measured in US Dollars.
GOLD (XAU/USD) - Technical analysis
Gold opened with a bearish trend today, falling below the $1,913.15 mark, which was further emphasized by the candlestick's closure over the last four hours beneath this threshold. This confirms the anticipated bearish momentum in both short-term and intraday contexts, setting sights on further declines potentially reaching $1,892.00 and further down to $1,873.50.
This downward trajectory remains robust, underscored by the negative influence of the EMA50. However, it's essential to note that if the gold price doesn't maintain its position below $1,913.15, we might witness recovery efforts targeting the $1,929.00 level before any renewed downturn. Today's projected trading spectrum ranges from a support level of $1,890.00 to a resistance at $1,925.00.
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