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Gold Technical Analysis: Gold is Headed for New Buy Levels

The continuation of the strength of the American dollar increased the losses of the gold price XAU/USD, which fell to the support level of $1907 per ounce. This is the lowest it has been for two weeks and settled around the level of 1913 dollars per ounce at the beginning of Wednesday's session.

This occurred before the announcement of the US inflation figures, which will have a strong reaction on the future of the US Federal Reserve Bank's policy and, consequently, on the price of the dollar and then gold.

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    On the other hand, stock indexes have seen a wide range of swings in recent weeks amid uncertainty over whether the Federal Reserve is done raising US interest rates. The central bank has already pulled its key interest rate to its highest level in more than two decades as it tries to bring inflation back to its 2% target. The high rates work to reduce inflation by slowing down the entire economy and lowering the prices of stocks and other investments.

    • Several reports coming this week could influence the Fed's thinking.
    • Today will be the last monthly update of the prices paid by American consumers across the country.
    • Economists expect it to show that prices rose broadly by 3.6% last month compared to a year earlier.
    • Inflation has mostly slowed since peaking above 9% last summer, but economists warn that the latter part of the improvement may be the hardest to achieve.

    On Thursday there will be reports on wholesale inflation and US retail sales. The strong spending by American households has been the main driver to keep the US economy growing, but it may also encourage companies to keep trying to raise their prices even more. Several recent strong reports on the economy have eased fears of a painful recession, consolidating long-awaited expectations. But they may also add more fuel to the pressures that keep inflation high, which could prompt the Fed to keep US interest rates higher for longer.

    Hopes for a resilient economy mean professional fund managers globally are feeling less pessimistic about stocks. As the percentage of their investments in stocks reached a 17-month high, according to a Bank of America survey, even though managers are not doing all they can and will continue to keep a large portion of their investment portfolios in safe cash.

    60% of fund managers say they believe the Federal Reserve is done raising interest rates, Bank of America analysts wrote. This is a sharp change compared to July, when only 9% said so. Traders overwhelmingly expect the Federal Reserve Bank meeting to end next week with US interest rates remaining unchanged. But next week's stronger-than-expected reports could weigh on things later this year, with traders seeing a greater risk of another rate hike.

    Investors also lowered their expectations regarding interest rate cuts that may occur next year.

    Today's XAU/USD Gold Price Predictions:

    According to the performance on the daily chart below, the price of gold XAU/USD is witnessing a downward shift. The bears' control over the trend will strengthen if the prices move towards the support levels of $1900 and $1885 per ounce respectively. This may happen if the US dollar receives a strong upward wound from the US inflation figures, which may support a tightening of the US Federal Reserve Bank's policy. On the other hand, the return of the price of gold above the resistance of $1945 per ounce will be important for the return of the bulls' confidence in controlling the direction again.

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    Mahmoud Abdallah
    About 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.

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