The failure of the gold price XAU/USD to move above the resistance of $1945 per ounce will support the formation of the head and shoulders, which paves the way for technical selling operations.
With the continued strength of the US dollar, the price of gold XAU/USD is subject to selling operations, pushing it towards the support level of $1895 per ounce at the time of writing. The sell-off in bond markets shows no sign of abating as investors dump government securities in favor of cash amid expectations that US interest rates may rise further. Despite the tightening cycle nearing its end, the dovish drumbeat from the Federal Reserve has grown louder, worrying investors who were betting on US interest rate cuts as early as the spring of 2024.
Accordingly, the yield on 10-year US Treasury bonds rose above 4.50% on Monday for the first time since November 2007 and will continue to rise to new record levels today. At the same time, the yield on the 30-year bond rose to its highest level in 12 and a half years as long-term interest rates adjusted to the Federal Reserve's "rising for longer" slogan.
For his part, Minneapolis Federal Reserve Bank President Neil Kashkari hinted this week that "interest rates are likely to rise a little bit" if the U.S. economy remains fundamentally resilient, while Chicago Federal Reserve Bank President Austin Joolsby reiterated that interest rates should remain elevated for a longer period than the indicators expected. The odds of a final 25 basis point hike in US interest rates are now 50%, up from 40% before the Federal Open Market Committee's FOMC decision last week. However, there has been no notable easing in interest rate cut expectations over the past week, suggesting there is room for further repricing if inflation remains stubbornly high.
The next update on the US inflation front will be the core personal consumption expenditure price index next Friday, which rose in July. If the Fed's preferred rate gauge falls to 3.9% in August as expected, the rise in bond yields could pause for breath, halting the US dollar's advance. Meanwhile, though, there is no stopping the dollar as the dollar index is back above 106.0, reaching its highest level since late November. The remarkable thing is that long-term bond yields have jumped across the board, with the exception of UK government bond yields, yet only the dollar remains resilient.
Deteriorating economic data in Europe, the never-ending real estate crisis in China, and the sudden rise in oil prices have weakened the outlook for most other major currencies. Even if banks like the European Central Bank and the Bank of England aren't about to cut interest rates anytime soon, the US economic outlook is much stronger right now. Furthermore, the bleak picture globally tends to attract safe-haven demand for the dollar, so there could be more gains in the near-to-medium term.
This can only be bad news for the euro and sterling, which have fallen below key levels at $1.06 and $1.22 respectively over the past day. The Japanese yen is also under increasing pressure as the Bank of Japan sets high standards to ensure exit from the overly accommodative policy.
There were some hopes that the Bank of Japan would soon begin laying the groundwork for a final exit, but the cautious statements made by Governor Ueda in recent days suggest that the timing is still a long way off. The last time the yen approached the ¥150 level a year ago, Japanese officials stepped up their verbal warnings before going ahead and intervening in the foreign exchange market to support the currency. But verbal intervention was unusually rare this time, which may be an indication that the threshold has shifted somewhat.
Today's XAU/USD Gold Price Predictions:
- According to the performance on today's chart below, the price of gold XAU/USD broke the support level of $1900 per ounce.
- This is confirming the extent to which the bears have control over the trend and at the same time moving the technical indicators towards strong selling saturation levels.
- Therefore, it is best to think about the levels to buy gold.
I will be ready to rebound upwards at any time, especially if the gains of the US dollar stop, where, as I mentioned before, gold will receive a boost from the growing global geopolitical tensions and fears of a global economic recession. The closest buying levels for gold are currently risk-free 1892 and 1878 dollars respectively.
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