The price of gold has recovered from its year-low to rise beyond $1,700 in anticipation of an increase in US inflation

Gold’s price chart shows a return to the annual bottom after a corrective pullback. Optimism from the White House and conflicting news on China’s economy are putting the XAUUSD in a better position to rebound from recent losses. The June US CPI will be critical in light of concerns about Fed aggressiveness and recession.

In intraday trading at $1,727 on Wednesday, gold price (XAUUSD) rose by just 0.08 percent to recoup some of the previous losses. According to the metal’s near-term technical view, prices will see a corrective drop. Fundamentals, on the other hand, are working against gold purchasers amid recessionary worries and speculation about the Federal Reserve’s rapid rate rises.

The price of gold reflects the market’s uncertainty

After a glimmer of hope the previous day, the market’s mood has remained tepid. Dollar Index (DXY) rises in the face of recession/inflation worries, while representing the sentiment Risk appetite appears to be improving as seen by the slightly bid S&P 500 Futures and the recent rebound in US Treasury rates, which have increased by 2.7 basis points (bps) to 2.985 percent. As a result, a lack of direction confuses traders, as seen by the most recent movements in the Gold Price.

The White House Memo (WH Memo) appears to be a recent challenge for market bears. Reuters reports that the White House produced a document on Tuesday saying that “the US economic indicators, particularly the June jobs report, are not consistent with a recession in the first or second quarters.”

Both the June NFIB Business Optimism Index in the United States and the July Eurozone/German ZEW Survey were released at the same time. When compared to the previous reading of 93.1, the US business confidence index fell to its lowest level since early 2013. German Economic Sentiment, however, fell to -53.8 in July, much below forecasts of -38.3. The Eurozone’s equivalent fell to -51.1 from a prior reading of -28.0 and a predicted decrease of -32.8 points. Germany’s ZEW Survey Current Situation sub-index came in at -45.8 in July compared to the expected -34.5, according to a press release.

Even if gold purchasers aren’t questioned, the IMF’s newest economic estimates appear to have reignited concerns about a recession. 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. According to Reuters, the International Monetary Fund (IMF) included the updated projections in its annual evaluation of the US economy, which underscored the problems of rising inflation and the sharp Federal Reserve interest rate rises required to control prices.

China’s Coronavirus Situation

The gold price is getting conflicting signals from the latest Covid data out of China. The virus variant’s rapid proliferation in Shanghai and the newly declared lockdown in Wugang city of Henan Province may be to blame. New activity limits might rekindle market concerns about an economic downturn, which would benefit the pair bears now that the next economic unlock is not far away. This current rise in Shanghai’s covid figures was inside the quarantine region, which challenges the pessimicity and benefit XAUUSD purchasers. This is to be observed, though.

The US Consumer Price Index (CPI) is critical

June’s CPI statistics will have a significant impact on the gold price, given the hawkish bets on the Fed’s interest rate policy by investors. CPI is expected to grow from 8.6 percent to 8.8 percent in the United States this year, which might lead to a quicker Fed rate rise and a lower gold price. However, if XAUUSD has a negative surprise, it might prolong the current correction from the annual low.

Technical Predictions for the Gold Price

Gold’s price has lately retested its intraday high after recovering from a horizontal region set since April 2021. Also, the RSI is oversold, which suggests that the XAUUSD is ready to bounce.

Recovery must, however, surpass the December 2021 low around $1755 in order to persuade gold buyers. In spite of this, the 61.8% Fibonacci retracement of March 2021-22’s upward movement, at $1,828, might test gold’s continued ascent.

If Gold Price falls below $1,720-25, it might fall into an upward sloping support line from March 2021, at $1,708 by the time of this writing.

After a fall below $1,708 in the quotation, the bears may be tested by the $1,700 threshold before being sent to the $1,676-2021 bottom.

Leave a Comment