Gold was bought narrowly in the Asian session on Wednesday and took some of the previous day’s losses to begin trading at four-week lows of $1923–1922. XAU/USD is currently trading below $1930, up almost 0.20% on the day, but the upside is still unclear. 

Overall weakness in the stock market, coupled with a slight devaluation of the US dollar (USD), has become a major support for gold prices. China’s weak employment data on Tuesday added to concerns about a bleak outlook for the world’s second-largest economy. Furthermore, Moody’s downgraded the credit ratings of many US banks, reducing investor interest in risky assets. Anti-risk flows tend to attract high-value assets.

Meanwhile, the US dollar index (DXY), which tracks the dollar’s yield against various currencies, fell below a one-month high it tested on Tuesday alongside gold prices. Dove comments from Philadelphia Fed President Patrick Harker that they could begin rate cuts next year overnight have prevented the dollar from making any new bets, but losses will still be limited. Market participants now seem to believe that the Fed will maintain its hawkish stance in the resilient US economy.

The bets were supported by the US jobs report, which pointed to continued tightening in the labor market and increased the likelihood of sales. Also, Fed Chair Michelle Baumann said on Monday that the door is open for a 0.4 point rate hike in September or November, and that should continue to be a driving force for money. Traders may want to sit on the sidelines ahead of Thursday’s release of new US economic data. The major US CPI reports will play an important role in shaping the economy’s expectations of future Fed inflation. This, in turn, will increase demand for the dollar and help determine the next direction for gold prices. Therefore, watch out for a strong buying continuation to confirm the formation of XAU/USD in the near term.

Gold Technical Analysis:
1.Gold prices have gained good momentum and are supported by many factors.
2.Weak risk and a slightly lower USD support the safe-haven XAU/USD.
3.Betting that the Fed will raise rates further will limit further increases.

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