The Gold Spot Price (XAUUSD) is experiencing a resurgence, riding a two-day winning streak fuelled by recent economic developments.
Wednesday saw a notable gain of 1.18%, primarily attributed to a slowdown in the U.S. inflation rate, which stood at 3.4% year-on-year, meeting expectations but showing a slight decline from the previous month. Of particular significance is the core inflation rate, excluding volatile food and energy categories, which marked its slowest year-over-year pace since April 2021.
Market sentiment has shifted in response to these figures, with traders now pricing in a 32% probability of a rate cut in July, reflecting growing expectations compared to earlier assessments. As attention turns to upcoming economic indicators, particularly jobless claims, traders are poised to gauge the health of the labour market. This data point carries significant weight as it serves as a barometer for inflationary pressures and could influence the likelihood of future rate cuts. Will the labour market, a key driver of inflation, cool down enough to warrant a rate cut?
Technical
The Gold Spot Price has demonstrated a robust uptrend, supported by technical indicators and market sentiment. Trading above the 100-day moving average, the spot price’s ascent has been validated by an ascending channel pattern, reinforcing its upward trajectory.
Initially, support at the 2306.57 level propelled the spot price past the moving average, signalling bullish momentum. However, encountering resistance at the 2378.39 level amid overbought RSI conditions led to a temporary downturn. Nonetheless, a retracement to the 61.80% Fibonacci Retracement Golden Ratio level prompted a reversal.
This reversal culminated in a retest and subsequent breakout above the 2378.39 resistance level, indicating the dominance of bullish traders. If upside momentum persists, the 2417.81 level, marking a one-month high, could serve as an attractive potential target for further gains. Conversely, ongoing overbought RSI conditions suggest caution, with the potential for a retest of the 2378.39 level if bearish pressures resurface.
Summary
The Gold Spot Price showcases resilience amid shifting economic winds buoyed by inflationary cues and rate-cut speculation. Technical indicators support its uptrend, with a breakout of resistance at 2378.39 and a potential upside target at 2417.81. However, caution remains warranted amid overbought RSI conditions.
Sources: Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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