- Throughout this week's trading, the price of an ounce of gold is subjected to selling operations that pushed it towards the $1914 support level, the closest to testing the $1900 psychological support, which confirms the bears' control over the trend.
- The strength of the US dollar continues to negatively affect the performance of the gold price and the strength of the US currency on an important and influential date today, as US inflation figures will be announced, which will have a strong and direct reaction to the future tightening of the US Federal Reserve's policy.
The continued weakness in gold prices came as investors looked forward to the release of a key consumer price inflation report on Thursday. Economists expect the report to show US consumer prices rose 0.2 percent in July, matching the slight increase seen in June. Core consumer prices, which exclude food and energy prices, are also expected to have increased 0.2% for the second month in a row.
The annual rate of consumer price growth is expected to accelerate to 3.3 percent in July from 3.0 percent in June, while the annual rate of core consumer price growth is expected to remain at 4.8 percent.
In general, investors will be looking for the report to reinforce expectations that the Federal Reserve will leave US interest rates unchanged next month. CME Group's FedWatch tool currently indicates there is an 86.5 percent chance that the Fed will leave interest rates unchanged in September. Fed officials have said repeatedly recently that their next interest rate decisions will depend on what the data tells them, and they pointed to reports on inflation and the labor market in particular. According to economists at Deutsche Bank, "With risks increasingly shifting to two sides, Fed officials have begun to shift focus toward how long they will keep interest rates steady at sufficiently restrictive levels."
A much worse-than-expected reading on Thursday could raise concerns that the Fed's job of fighting inflation is not yet done, and that it may have to continue raising US interest rates. At the very least, the Fed may push to keep interest rates higher for longer than expected. In general, high rates slow inflation by undermining the entire economy and hurting investment prices. The Fed has already pulled the federal funds rate to the highest level in more than two decades. And since it takes a historically long time to raise interest rates to have a full effect throughout the economy, the risk of a recession remains.
Gold Technical Outlook
According to the performance on the daily chart below, the general trend of the gold price is still bearish, and the move towards the psychological support level of $1900 will support more bear control over the trend. The next most important support will be $1885, which I prefer to buy from, and at least if the US dollar’s strength continues after stronger inflation figures the American Today. As I mentioned before, a strong reversal of the XAU/USD gold price direction to the upside will not occur without returning to the vicinity of the $1975 resistance again, and this may happen if the $1950 resistance is broken again. In general, I still prefer buying gold from every downward level.
Ready to trade today’s Gold prediction? Here’s a list of some of the best XAU/USD brokers to check out.