Gold Technical Analysis: Price of Gold Headed to 3-month Low

Although the US dollar declined after announcing that US interest rates would remain unchanged as expected, the XAU/USD gold price was subjected to selling operations that pushed it towards the support level of $1929, its lowest in three months. Gold was stable around it at the time of writing the analysis. Before the Fed's policy decisions, the price of gold was on the rise, along with the resistance level of $1972 an ounce.

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  • Gold prices rose in the run-up to the Federal Reserve's latest policy decision, as markets were expecting the US central bank to keep interest rates unchanged after signs of slowing inflation.
  • Meanwhile, the US dollar has been hovering around multi-week lows, making dollar-denominated bullion more attractive to overseas buyers, after weak US consumer inflation data boosted bets for a pause in the Fed's tightening cycle.

Treasury yields also fell after data showed that US producer prices posted their smallest annual increase in nearly two-and-a-half years.

Inflation, as measured by the Fed's preferred metric, remains more than double the US central bank's 2% target. There is a more than 95% chance of a pause in US interest rate hikes but almost a 60% chance of an increase at the meeting in July, according to CME Group's FedWatch tool.

On the gold demand front:

Indians are likely to sell a record amount of used gold jewelry this year to take advantage of rising domestic prices for the precious metal, according to the World Gold Council. And if domestic prices continue to rise, recycled bullion sales are expected to jump more than 20% and match the previous high of 119.5 tons recorded in 2019, P.R.A. said. Somasundaram, Regional CEO for India at the World Gold Council, in an interview. "This is likely to see India import less gold this year," he added from Mumbai.

Reducing purchases by the world's second largest gold importer could put downward pressure on international prices, which are currently near $1,960 an ounce. Gold prices in India have jumped nearly a fifth over the past 12 months, more than double what they have jumped globally, due to a weaker rupee making the precious metal more expensive.

Gold is a popular investment in India, especially in rural areas where it can be difficult to access banking services. Farmers often buy the mineral after a good harvest and then sell it and, if necessary, buy seeds, fertilizers and other items. Indian families and temples collectively own about 25,000 tons of gold. The council's data showed that sales of recycled gold in India, which is defined as bars or jewelry sold for cash, jumped by a quarter in the first three months of 2023 compared to the previous year, reaching about 35 tons. Bullion purchases decreased by 17% to 112.5 tons during the period.

XAU/USD gold price forecast today:

  • The XAU/USD gold price is witnessing a strong downward shift.
  • It may enter the vicinity of new buying levels, if it moves towards the $1915 and $1895 support levels, respectively.
  • The bulls will not have strong control over the direction without returning to the vicinity of the resistance level of 1970 dollars an ounce again.

The gold market will be affected by the rest of the monetary policy announcements of central banks from the eurozone and Japan, and then the reaction to the results of US economic data today and tomorrow. In general, I still prefer to buy gold from every downside level.

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Mahmoud Abdallah
Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.