The Gold Spot Price (XAUUSD) experienced a notable shift in momentum last week, ending a five-week winning streak and potentially setting the stage for back-to-back weeks of losses. Currently trading 1.55% lower, it hovers at its lowest level in four weeks, reflecting market dynamics influenced by recent events.
The decision by the Federal Reserve to maintain interest rates at a 23-year high has injected uncertainty into the market, with indications of potential future rate cuts. However, the Fed’s cautious stance, prompted by upbeat inflation data, may delay these anticipated cuts, exerting pressure on the spot price in the long term.
As indicated by CME’s FedWatch Tool, market sentiment reflects moderate expectations for the first cut in September, with a 60% probability of a rate cut anticipated. As investors await further cues from US Nonfarm payrolls (NFP) data, which could offer insights into the Federal Reserve’s policy direction, the gold market remains poised for potential fluctuations driven by economic indicators and central bank decisions.
Technical
The Gold Spot Price has been ensnared in a downtrend, evident from its position below the 100-day moving average and confirmed by a descending channel pattern, signalling a bearish trajectory.
Within the downtrend, support materialized at the 2281.62 level, coinciding with the lower boundary of the descending channel. This sparked a bullish reversal amid oversold RSI conditions, propelling the spot price towards the channel’s upper boundary. Yet, the rally faltered at the 2328.28 level, accompanied by a decline in upside volumes, leading to the formation of a resistance level.
As uncertainty looms ahead of the Nonfarm Payrolls, trading volumes have tapered off, resulting in a sideways consolidation within a rectangle pattern. A breakout from this pattern could trigger an extended move in the breakout direction, with the 2281.62 support level and 2328.28 resistance level serving as potential points of interest depending on the breakout direction.
Summary
Gold Spot Price’s recent shift, ending a winning streak, signals potential losses. Following the Fed’s decision to maintain interest rates amidst inflation concerns, the market awaits Nonfarm Payrolls data for further cues. Technical analysis suggests a downtrend, with support at 2281.62 and resistance at 2328.28 levels, shaping future price action.
Sources: Federal Reserve, CME, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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