- After its strong growth, a temporary retreat was natural.
- XAU/USD could still develop a new leg higher if it stays above $1,924.
- The US inflation should bring high action tomorrow.
The gold price is trading in the red at $1,926, below today’s high of $1,932. Today’s rally proved to be corrective only. The downside pressure remains high as the US dollar remains strong in the short term.
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Yesterday, the US, Eurozone, and Japanese data came in mixed. Today, the Chinese Consumer Price Index reported a 0.3% drop versus the 0.4% drop expected, while PPI registered a 4.4% drop compared to the 4.0% drop forecasted.
Tomorrow, the US inflation figures should bring sharp movements in all markets, not only on the XAU/USD. The CPI m/m is expected to report a 0.2% growth in July. The Consumer Price Index y/y could increase by 3.3% versus only 3.0% in the previous reporting period.
While Core CPI may announce a 0.2% growth, the same as in June, the US Unemployment Claims could jump from 227K to 231K.
The fundamentals should have a significant impact on Friday as well. The UK will release the GDP, Prelim GDP, Industrial Production, Goods Trade Balance, Index of Services, and Manufacturing Production. At the same time, the US publishes the Prelim UoM Consumer Sentiment, PPI, and Core PPI data.
Gold Price Technical Analysis: Strong Downside Below $1932
From the technical point of view, the XAU/USD escaped from the flag pattern (down channel). However, it has failed to stabilize above the broken downtrend line, indicating strong sellers.
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It has dropped below the ascending pitchfork’s lower median line (lml) and is almost to hit the $1,924 former low, representing a key downside obstacle.
Taking out this support should result in more declines, at least until the weekly S1 (1,920). Only staying above $1,924 and making a new higher high trigger a new swing higher.
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