Prior to the European session of trading on Wednesday, the gold price (XAUUSD) has fallen to $1,725. Consequently, the precious metal continues to trade inside a weekly bullish falling wedge chart pattern despite fading an early-day recovery from the annual low. As a result, XAUUSD’s decline might be attributed to the Eurostoxx 50 Futures’ poor performance and the US Dollar Index’s recovery (DXY). In the lead up to the June US Consumer Price Index (CPI), gold dealers face uncertainty over China’s economic growth and inflation.
A rise in the price of gold is expected as a result of an increase in US inflation
For now, traders remain cautious ahead of the key US inflation rate, which has risen to an all-time high and the Federal Reserve’s aggressive forecasts. Additionally, the International Monetary Fund (IMF) has just revised its economic estimates and largely factored in a 75 bps rate increase from the Federal Reserve.
The euphoria of a risk-taking mentality fades
There are always concerns about the world’s two largest economies — the United States and China — and Europe as well. The International Monetary Fund (IMF) recently announced new economic estimates for the United States, which in turn prompted worries about the White House’s earlier Memo. However, the International Monetary Fund (IMF) has lowered its forecast for US GDP growth in 2022 from 2.9 percent to 2.3 percent, owing to updated US statistics. President Trump’s administration produced a document on Tuesday stating that “the US economic indicators, particularly June’s jobs report, are not consistent with a recession in either the first or second quarters,” according to Reuters. Stock futures in the United States and Europe are under pressure despite an optimistic start to the day, which helps to reflect the atmosphere.
Yield curves are in favor bearish XAUUSD
Fears of a recession are weighing on the gold price because of the inverted yield curve between 10-year and 2-year US Treasury notes. While the 10-year Treasury note is up a modest 0.08 percent to 3.05 percent, the 2-year note is down as much as 0.08 percent to 3.05 percent at the latest, reversing a two-day decline. This morning’s yields have been choppy, making it difficult for XAUUSD traders to make any decisions.
The situation in China is causing traders concern
The market’s mood and gold dealers are both challenged by China’s inconsistent communiqué updates. Consider that Shanghai’s covid numbers have risen, and the newest lockdown in Wugang city of Henan Province looks to be temporary, which further investigates the coronavirus concerns surrounding China. Alternatively, the Chinese Customs Official’s remarks have an impact on the price of gold. In spite of trade growth in May and June reversing the decline in April, the General Administration of Customs’ Li Kuiwen told a press conference in Beijing on Wednesday that China’s overseas commerce is still unstable and unpredictable.
Reversals in risk sentiment suggest a cautiously negative outlook
On the previous day, the one-month risk reversal (RR) on the XAUUSD fell to -0.085. As a result, the difference between the call and put option premiums is expected to decrease for the fifth consecutive week. This week’s weekly change looks to be slower than previous weeks, but the RR’s magnitude has not changed significantly. This suggests that despite the negative tendency, gold traders have recently been more cautious, which might have limited the commodity’s recent movements.
Technical analysis of the gold price
In a one-week-old falling wedge bearish chart pattern, gold price recovers off its annual low. As a result, the yellow metal has remained close to the chart’s support line, indicating restricted movement.
Even if the gold price continues below $1,740, the bearish RSI (14) and lower-high and lower-low patterns will continue to confront gold purchasers.
Before then, the $1,737 level of the 100-HMA might have protected the XAUUSD’s fast rebound moves. On press time, a trend line from June 29, around $1,775 by that date, will be in focus if the Gold Price goes over $1,740.
Contrary to popular belief, Gold’s short-term major support is in the $1,719-25 range, a breach of which may send the metal’s price as low as a rising support line from March 2021 at $1,708, or perhaps lower. It’s possible that the $1,700 level may serve as a luring factor for bears if the price of gold stays below $1,708.