GOLD Price Analysis – July 26, 2023

Daily Price Outlook

On Wednesday, XAU/USD surged by +0.45%, reaching above $1972.36. US Treasury Yields remained steady before the Federal Reserve's (Fed) upcoming decision, with the 2-year yield falling by 1%, while the 10-year yield slightly climbed to 3.88%.

The Federal Housing Agency's Housing Price Index and S&P/Case-Shiller Home Price Indices (YoY) for May both exceeded expectations with readings of 0.7% and -1.7%, respectively. Additionally, the Richmond Fed Manufacturing Index for July showed a better-than-predicted reading of -9, compared to the expected -10.

The Federal Reserve is concluding its July monetary policy meeting on Wednesday afternoon. Wall Street anticipates the FOMC to begin a rate hike campaign, raising its benchmark rate by 25 basis points to a range of 5.25% to 5.50%, the widest range since 2001. As this move is widely anticipated, it is not expected to cause significant volatility. Traders and investors should focus on policy advice.

There won't be a summary of economic forecasts this time, but Jerome Powell will hold a press conference after the central bank's decision is revealed. Despite the weaker-than-expected June U.S. CPI report, Powell may adopt a more dovish stance to prevent excessive loosening of financial conditions and maintain flexibility in case inflation rises in the future.

If Powell suggests the need for further efforts to maintain price stability and hints at future rate increases, Treasury yields, especially at the short end of the curve, may rise. This could catch many traders off guard and lead to a short squeeze.

A significant dollar rally resulting from the short squeeze would be detrimental to precious metals. While there might be short-term losses for gold (XAU/USD) and silver (XAG/USD), a major market sell-off is unlikely. The normalization cycle is nearing completion, even with potential further interest rate increases.

However, traders should also consider the possibility of Powell adopting a more lenient stance. If he emphasizes a data-dependent approach and the markets anticipate an easing cycle, it could weaken the US dollar, benefiting silver and gold.

Gold (XAU/USD) Technical analysis

Gold price remained relatively stable yesterday, maintaining its position around $1,960.00, thereby sustaining the bearish trend scenario without any significant changes. The focus remains on the potential target at $1,945.20.

It is important to note that a breakthrough of the mentioned target level could lead to further losses, potentially driving gold price down to $1,913.15 in the short term.

On the other hand, a breach of $1,977.25 would be crucial in resuming the primary bullish trend and aiming for gains towards $2,000.00, followed by $2,016.90.

Today's projected trading range lies between the support level at $1,945.00 and the resistance level at $1,977.00.