Looking at the XAU/USD chart, it is evident that the price of gold experienced a significant increase on Friday, July 5th, surpassing the $2390 level for the first time in over a month. This rise was attributed to the release of key US employment data, which hinted at a weakening labor market and subsequently heightened expectations of a Federal Reserve interest rate cut in September. However, the following Monday saw the gold price retract to $2360 per ounce, indicating that the bullish momentum was short-lived. This reversal of fortune suggests a bearish outlook for gold prices in the near future.
From a technical standpoint, the XAU/USD chart shows that gold has found support at the $2300 level, with the price consistently bouncing back whenever it dipped below this threshold in June. This pattern of behavior indicates a strong demand for gold at this price point. Additionally, the price action since April has allowed for the identification of a descending channel, with the recent downward movement returning the price within this channel. Furthermore, the breakout of local resistance appears to be in question, as signs of seller activity in the $2380-2400 range signal a potential further decline towards the key support level of $2300.
External Factors Influencing the Gold Market
The upcoming testimony of Federal Reserve Chairman, Jerome Powell, before Congress is expected to have a significant impact on the gold market. Powell is scheduled to speak before the Senate and House of Representatives, where any indication of weakness in the US economy could serve as a catalyst for a positive movement in gold prices. A bearish outlook on the economy may lead to increased expectations of an interest rate cut in the near future, subsequently boosting the appeal of non-yielding assets like gold. Currently, the probability of a rate cut in September stands at 77% according to CME’s FedWatch Tool, further supporting the potential for an uptick in gold prices.
The recent movements in gold prices, as reflected in the XAU/USD chart, suggest a possible downward trend in the near future. Technical analysis points to a weakening bullish momentum and the potential for a further decline towards the $2300 support level. External factors, such as the upcoming testimony of Federal Reserve Chairman Jerome Powell, also have the potential to influence gold prices in the coming days. Traders and investors should closely monitor these developments to make informed decisions regarding their positions in the gold market.