Daily Price Outlook
Gold price (XAU/USD) has been unable to halt its ongoing declining streak and continues to face selling pressure for the second consecutive day this Wednesday. It has slipped closer to the monthly low reached yesterday, currently hovering around the $1,910 level during the Asian trading session. However, the bullish bias in the US Dollar was seen as one of the key factor that has been pushing the gold price down. Simultaneously, the looming risks of an impending recession are playing a role in liiting the of losses for XAU/USD. Moreover, investors appear cautious about making strong bids ahead of the upcoming release of the US Consumer Price Index (CPI) data.
US Dollar Gains Momentum, Pressuring Gold Demand
The broad-based US dollar has been gaining momentum after some ups and downs on Tuesday, and this is putting pressure on the demand for gold. It is worth noting that many people believe that the Federal Reserve will stick to its tougher stance on interest rates, which is pushing up US Treasury bond yields and helping the dollar. Many in the market think the Fed will keep interest rates higher for a while and are expecting one more 0.25% increase before the year ends. This confidence in the Fed's approach is boosting the dollar and making gold less attractive to investors.
However, these bets were strengthened by positive US economic data from last week, indicating a strong economy. Furthermore, the slow decrease in inflation means the Fed might keep tightening policies. Thereby, investors keeping a close eye on the US Consumer Price Index (CPI) numbers coming out soon.
Impact of Inflation and Market Sentiment on Gold and the US Dollar
Although, if inflation continues to stay high, it could push the US dollar even higher, possibly reaching a six-month high. This, in turn, would likely put more downward pressure on gold prices. However, if there are worries about China's economy and higher borrowing costs, gold prices might not fall as fast.
Investors are a worried about the economic situation in China and are being careful with riskier investments. So, while the US dollar could rise, gold might not fall as fast if the overall mood in the market remains uncertain.
ECB Interest Rate Decision and Its Potential Impact on Gold Prices
Apart from this, the European Central Bank (ECB) is set to make an interest rate decision on Thursday. This could shake things up for gold prices. People are predicting that the ECB will likely keep their main interest rate at 4.25% because inflation is not surging, and there's worry about the economy slowing down. Therefore, we can expect some significant moves in the gold market after the ECB's decision.
GOLD(XAU/USD) - Technical Analysis
The gold price has decisively breached the $1,913.15 mark, evidenced by its closure below this level yesterday and has embarked on a downward trajectory today. Its next anticipated target stands at $1,890.00. The chart manifests a "head and shoulders" pattern, signaling potential further drops with subsequent goals pinpointed at $1,873.50.
In light of this, we anticipate continued declines in the forthcoming sessions. However, it's pivotal to note that if the gold price surpasses the $1,913.15 and subsequently the $1,916.80 thresholds, this could negate the bearish outlook, prompting a potential intraday recovery. For today, we foresee the gold price oscillating between a support level of $1,875.00 and a resistance barrier at $1,920.00.
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