Gold Price technical outlook
Gold Price extends bounce off an upward sloping support line from March 2021. That said, the corrective pullback from the yearly low also takes clues from the oversold RSI (14) to direct XAU/USD buyers towards a horizontal area comprising multiple levels marked since early 2021, surrounding $1,721-22.
It’s worth noting, however, that the 78.6/% Fibonacci retracement of March 2021-22 upside, near $1,760, could test the metal’s upside past $1,722, a break of which could quickly propel Gold Price to May’s low near $1,787.
On the contrary, the aforementioned support line from March 2021 joins oversold RSI (14) to restrict short-term XAUUSD declines around $1,709. Also acting as a downside filter is the $1,700 threshold.
In a case where Gold Price remains weak past $1,700, the odds of witnessing a south-run towards early 2021 bottom of $1,676 can’t be ruled out.
US economics also probe XAUUSD bears
Friday’s mostly downbeat prints of the US economics helped strengthen concerns that the market expectations of a 100 bps Fed rate hike aren’t well-suited amid impending recession fears. The Index of Consumer Expectations declined to its lowest level since May 1980 at 47.3. The downbeat figures also joined a 0.20% contraction by the US Industrial Production for June to favor XAUUSD buyers. However, US Retail Sales for June grew 1.0% MoM versus 0.8% expected and -0.1% prior (revised from -0.3%) whereas the University of Michigan’s Consumer Confidence Index edged higher to 51.5 in July’s flash estimate, versus 49.9 expected and 50.0 prior.
Fed policymakers intervened to cool down market expectations of a 1.0% rate hike on Friday, which in turn helped the Gold Price to defend the yearly low marked on Thursday, not to forget positing a rebound from the key support line on a closing basis.
Atlanta Fed President Raphael Bostic said on Friday that June’s 75 basis points rate hike was a “big move” and added that the Fed wants policy transition to be orderly, as reported by Reuters. On the other hand, San Francisco Fed President Mary Daly said on Friday that the “Fed is working on getting down inflation without stalling economy.” Further, St. Louis Federal Reserve Bank President James Bullard sounded neutral as he said, per Reuters, on Friday that it wouldn’t make too much of a difference to do a 100 basis points (bps) or a 75 bps rate hike at the next meeting. In this regard, Wall Street Journal’s (WSJ) Nick Timiraos also came out with a piece that turned down the market’s expectations of a 1.0% Fed rate hike.