Gold price posted weekly gains as US yields turned south. The short-term technical view of the gold dollar rate points to an uptrend. Buyers will remain in control as long as the $1,950 support remains intact. Let’s look at the details
What happened last week?
The price of gold wrapped up this week as US Treasury bond yields fell sharply and investors reacted to further softening in US inflation. As long as the price of gold remains above $1,950 an ounce, technical buyers will remain interested, especially as the Federal Reserve enters a blackout period next week.
Sales came after the mixed June jobs report on Friday. After that, the US Dollar (USD) struggled to find demand at the beginning of the new week. In the American session on Monday, the Federal Reserve Bank of New York’s monthly Survey of Consumer Expectations showed that consumers’ one-year inflation expectation fell from 4.1% in May to 3.8% in June, the lowest level since April 2021. It dropped and caused XAU/USD to finish the day in positive territory.
keep picking up
Meanwhile, Manheim announced that its Used Car Value Index recorded its biggest one-month decline since the start of the coronavirus pandemic from May to June. Investors started pricing in a weak Consumer Price Index (CPI) reading. Accordingly, it was significant that the 10-year US T-bond yield fell below 4% on Tuesday. It helped XAU/USD continue its recovery.
There is data from the U.S. Bureau of Labor Statistics (BLS) reported Wednesday. Inflation, measured by the change in the CPI, decreased to 3% on an annual basis in June from 4% in May. Core CPI inflation, which excludes volatile energy and food prices, decreased from 5.3% to 4.8%. On a monthly basis, both CPI and Core CPI increased by 0.2%, below forecasts. Investors are starting to reevaluate the Federal Reserve’s interest rate outlook. Accordingly, the USD came under heavy downward pressure after the inflation data. Also, the 10-year US yield fell more than 2%. As a result, the price of Gold extended its rise to the highest level of the last few weeks, around $1,960.
Producer price index
On Thursday, the BLS announced that its annual Producer Price Index (PPI) dropped to 0.1% in June from 0.9% in May. Wall Street’s main indexes opened sharply after soft producer inflation data. On the other hand, USD sales continued. However, gold struggled to capitalize on persistent USD weakness as XAU/EUR and XAU/GBP turned south. It also showed that capital outflow from USD was directed to Euro and Sterling instead of gold.
According to the CME Group FedWatch tool, the probability that the Fed will increase the policy rate by 25 basis points in December, in addition to the 25 basis points increase in July, was 32% at the beginning of the week, but declined below 20% after the CPI and PPI figures. Ahead of the weekend, the University of Michigan reported that its Consumer Confidence Index rose to 72.6 from 64.4 in early July. This data came in better than the market expectation of 65.5. It also helped the USD hold its ground while limiting the upward movement of XAU/USD.
next week for gold
June Retail Sales and second quarter Gross Domestic Product (GDP) growth data from China are important. It will be closely watched by market participants during the early trading hours of the Asian session on Monday. China’s economy lost momentum after a strong first quarter supported by the reopening of the economy.
The People’s Bank of China has taken various measures, such as a policy rate cut, to help the economy recover. On a quarterly basis, GDP is expected to expand by 0.5% in the second quarter from 2.2% in the first quarter. Stronger-than-expected GDP pressure from China, the world’s largest gold consumer, will help XAU/USD rise as investors are hopeful of an upbeat demand outlook.
Tuesday and other days
Retail Sales data for June, which is expected to rise 0.5% after the 0.3% expansion in May, will be on the US economic agenda on Tuesday. This data is unlikely to change the Fed’s market pricing on the rate outlook. However, a strong pressure will help the USD find demand with a snap reaction.
On Thursday, the US’s economic agenda will include Initial Weekly Unemployment Claims and Exiting Home Sales data. The Fed’s blackout period will begin on Saturday, July 15. In addition, policy makers will not be able to talk about monetary policy until the interest rate is announced on July 26. Hence, technical developments will drive the movement of XAU/USD next week.
Gold technical view
The Relative Strength Index (RSI) indicator on the daily chart has hit 60, its highest level since early May this week. Accordingly, this indicated that the bullish momentum has increased. In addition, XAU/USD has confirmed the bullish trend by breaking above the descending trendline since the beginning of May. As long as the pair continues to use the $150 area as support, it will target $1,980 (static level) and $2,000 (static level, psychological level).
The $1,930 (20-day SMA), $1,910 and $1,900-$1,890 (psychological level, Fibonacci 38.2% retracement) levels could be seen as the next support if buyers fail to defend the $1,950 – $1,955 level.
Gold / Dollar sentiment survey
According to the FXStreet Forecast Survey, XAU/UD shows that the yellow metal is progressing over the three timeframes studied. Moreover, it may maintain the bullish trend it has acquired recently. They marked an average price of $1,962 per ounce of the yellow metal with 50% of the bulls on the weekly view. In the broader perspective, the number of uptrends is increasing with average targets in the $1,990 region.
It is not yet clear whether XAU/USD will be able to break through the critical $2,000 threshold in a risky environment. The Overview chart presents a mixed picture. But the bets support progress. The three moving averages are showing a bullish trend. But the weekly lags behind the current price. Accordingly, this situation somewhat limits the upward direction. With a few exceptions, this area, the $2000 area, is like a natural magnet for the near term.
Latest status for bitcoin
Last week, the hot spot in the Bitcoin and cryptocurrency markets was Ripple’s legal victory over the SEC. This has significantly affected Bitcoin and altcoins. However, the developments that will occur during the week we mentioned above are also a pressure factor for Bitcoin.
cryptocoin.com When we look at it as a whole, Bitcoin has passed through the level of $ 31,400. At the time of writing, Bitcoin is at $ 31,233. Accordingly, we see that there is a movement area of approximately $ 1500 on a weekly basis.
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