- Safe haven buyers boost gold
- US CPI data kindles inflation concerns – gold rallies
- Gold nears key pivot point at 1807.68
On Wednesday, the yellow metal gold continues trading with a bullish bias at $1,812 level amid increased demand for safe-haven assets. A day before, gold closed at $1806.55 after placing a high of $1817.80 and a low of $1798.70.
Gold prices were little changed on Tuesday; however, they ended the day with minor losses. Gold moved slightly higher ahead of the U.S. inflation data, but gold prices plunged sharply amid the renewed strength in the U.S. dollar after the release of the CPI report.
The U.S. Dollar Index that gauges the greenback value against the basket of six major currencies surged 0.5% to 92.81. The surge in the U.S. dollar was driven by an upbeat consumer prices index report from the Bureau of Labor Statistics.
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Stronger dollar reins back gold price
On the data front, at 14:57 GMT, the NFIB Small Business Index for June surged to 102.5 against the forecasted 99.5 and supported the U.S. dollar that kept gold prices lower. At 17:30 GMT, the Consumer Price Index for June also rose to 0.9% against the projected 0.5% and supported the U.S. dollar that added further pressure on gold prices.
Furthermore, the Federal Budget Balance dropped to -174.2B against the estimated -205.0B at 23:00 GMT. Whereas the Core CPI for June soared 0.9% versus the expected 0.4%, pushing the U.S. dollar higher, which ultimately weighed on gold prices.
In June, the U.S. Consumer Prices rose by the most in 13 years, and this report suggested that Federal Reserve may now start tapering its asset purchases.
Fed stays quiet for now on CPI surprise
However, there was no immediate response from any Fed official on Tuesday over the increased CPI report last month. The bets that Fed will immediately start tightening its monetary policy after the increased U.S. CPI report faded away and helped gold limit its downward momentum.
In my opinion, despite a big jump in CPI data, the Fed would not move its needle as one month’s hotter reading on inflation isn’t enough to make such a big decision.
In our Gold XAU/USD Forecast we note that the markets are cautiously awaiting the testimony of the President of the Federal Reserve before Congress on Wednesday and Thursday, which is also expected to provide hints on the monetary policy outlook by the central bank.
On the other hand, according to the AFP compilation of data, the coronavirus pandemic that emerged in December 2019 has killed more than 4-million people across the globe. The worst affected country was the United States, with more than 600K deaths, followed by Brazil with 533,488 deaths, India with 408,764 deaths, Mexico with 234,969, and Peru 194,387 deaths.
The concerns regarding the delta variant of the coronavirus kept the safe-haven appeal alive in the market. The risk-off market sentiment eventually added some support to the declining gold prices. Thus, the precious metal remained flat throughout the day. Let’s take a look at the technical side of the market now.
Gold XAU/USD Forecast – Technical Levels: key resistance at 1826.78
Support Resistance
1797.56 1816.66
1788.58 1826.78
1778.46 1835.76
Pivot Point: 1807.68
Gold XAU/USD Forecast – Daily Technical Analysis: Bullish breakout ahead?
- On the 4 -hourly chart, gold has formed an ascending triangle pattern that’s extending strong resistance at 1,817 level along with a support level of 1,801 level.
- The XAU/USD has closed a bullish engulfing candle right above the 50 periods EMA (Exponential Moving Average – Red Line) at 1,807. Bullish engulfing candle indicates strong odds of a bullish trend continuation, whereas the EMA crossover also supports buying trend.
- The bullish breakout of the 1,817 level can lead gold prices towards the next resistance level of 1,826 and 1,847. Conversely, the breakout below 1,807 EMA support can drive further selling until 1,792 support levels.
Gold – XAU/USD – Trade Idea
Forex trading market participants will want to stay in bullish mode above 1,807 levels today with a target of 1,817 levels. Placing a buy stop over 1,817 will be an excellent idea with a target of 1,826 and 1,835. Good luck!
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