Gold price (XAU/USD) exhibited an inventory distribution profile, bouncing in a narrow range of $1,745.02-1,749.15, but has broken to the downside and retested its daily low of $1,744.00 in the Asian session. After relinquishing Friday’s low of $1,745.59, the precious metal’s five-day losing trend has continued. As investors await Federal Reserve (Fed) commentary on policy guidelines, the yellow metal will likely remain on tenterhooks.
In light of the Fed minutes, the hawkish tone may moderate as price pressures reach their peak and the effects of the US economy’s dwindling liquidity may reveal their real colors in the future. To preserve equilibrium, a 50 basis point (bps) rate increase appears appropriate. Also, “The majority of economists in a poll conducted by Reuters between August 16 and August 19 projected a half-point increase in the benchmark interest rate next month, which would bring it to 2.75 percent to 3 percent.”
This week, the US Durable Goods Orders will provide additional insight into the overall demand. According to the opinion of the market, the economic data would likely decrease to 0.6% from the previous release of 2%. A fall in economic statistics is not advantageous for the US dollar index when the US core Consumer Price Index (CPI) has already remained constant (DXY).
On an hourly scale, gold prices have fallen close to the 50% Fibonacci retracement (set from July 21’s low of $1,680.91 to August 10’s high of $1,807.93) at $1,744.70. For the counter, the downward-sloping trendline drawn from the August 12 high of $1,804.00 will provide significant resistance.
The 50-period Exponential Moving Average (EMA) at $1,755.00 is falling strongly, adding to downward filters. In the meantime, the Relative Strength Index (RSI) (14) is swinging in a bearish 20.00-40.00 range, which supports further decline.