Gold Price Forecast: At the brink of a bearish breakout

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XAUUSD Current price: $1,828.37

  • Fed’s Powell testimony spurred risk aversion amid inflation and growth fears.
  • US data pointed to slowing economic progress at the end of the second quarter.
  • XAUUSD is gaining bearish traction and is poised to challenge the weekly low.

Gold Price recovered sharply after posting an intraday low of $1,823.84 a troy ounce, jumping to a daily high of $1,849.06. XAUUSD resumed its decline after the US opening and as tepid local data coupled with US Federal Reserve chief Jerome Powell’s gloomy words sparked risk aversion. The dollar gathered momentum as stocks fell, with the bright metal currently trading at around $1,828 a troy ounce.

Financial markets are in risk-off mode after Fed’s head said that a big part of inflation won’t be affected by the central bank’s tools, although another part will be. On a positive note, he added that growth this year should still be fairly strong, but his comments clearly reflected concerns about inflation and growth.

Meanwhile, S&P Global published the June flash PMIs. Manufacturing output in the US slowed sharply in June, with the index falling to 52.4, an almost two-year low. The Services PMI contracted to 51.6 from 53.4 in the previous month, a five-month low.

Demand for safety has pushed government bonds higher, which in turn sent yields sharply down. Wall Street is feeling the hit, with most indexes trading in the red.

Gold Price short-term technical outlook

The XAUUSD pair trades within familiar levels, although near the lower end of its weekly range. The daily chart shows that sellers remain aligned around the 20 and 200 SMAs, both converging around $1,843.20. The Momentum indicator remains directionless within negative levels, while the RSI indicator turned marginally lower, currently at around 44, signaling persistent selling pressure, but without confirming another leg lower.

The 4-hour chart shows that strong selling interest remains aligned around converging 100 and 200 SMAs, now in the $1842 price zone, while the pair is also developing below a mildly bearish 20 SMA. Technical indicators have turned lower but remain around their midlines. A critical support level is the weekly low at 1,823.31, with further slides likely once below the latter.

Support levels:  1,823.30 1,814.70 1,803.90

Resistance levels: $1,843.20 1,853.10 1,867.25  

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