Gold Technical Analysis: Gold Heads for New Support Levels

The continuation of the gains of the American dollar brought more losses to the gold price XAU/USD reaching the support level of $1915 per ounce. It settled around its losses at the beginning of the trading session today, Thursday.

The US dollar is still the strongest in the expectations of the American interest rate coinciding with the good performance of the US economy despite the tightening of the US central bank's policy. The statements of the officials of the American Federal Reserve Bank support further tightening of the bank's policy, and besides, there was a demand for the purchase of the American dollar as a safe haven in light of the concern of a global economic recession led by China.

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But in the middle of this performance Gold prices may defy bond market signals and rise, as the World Gold Council says. Where gold prices can defy the signal sent by the bond markets and rise in the coming weeks according to a new assessment from the World Gold Council. In this regard, analyst Jeremy D. Bessemer says in a new monthly research note that the recent rise in long-term US Treasury bond yields compared to short-term yields would usually support the view that the US economy is entering a new growth phase.

Such developments do not traditionally support the price of gold, which tends to underperform during periods when investors are in risk-seeking mode, which usually occurs at the beginning of a positive economic growth cycle. The 1.0% drop in spot gold prices in August suggests that the precious metal is already following bond rules, with uncertain evidence suggesting that individual players have joined institutions in selling gold.

The London bullion company "Oronom" said in a recent note: "In the late summer of 2023, we will only observe the return of sellers to the market to allow us to refill our stock of depleted gold."

But de Bessemer at the same time says that gold can benefit because there is a possibility that bond market signals will be misinterpreted. The recent "downward decline" in the bond yield curve is usually associated with rising stock markets and falling gold prices, but stock markets have seen a decline in recent weeks. The analyst added that the rise in 10-year bond yields could reflect a rise in the risk premium in a market that has become more cautious, a development that usually favors the safe haven status of gold. He also said "the shift in the list of "higher interest rates for a longer period of time" and the forces of supply and demand and the rise in the risk premium" could be behind this move.

He adds by saying: "The last factor may begin to support gold prices if they continue to rise." And "especially in light of the constructive evidence that indicates that the American economy is slowing down significantly."

Bullion investors will be the first to notice that the US jobs numbers for July were revised downward again in August, which has become a pattern in recent months. This is a sign that the American job market may not be as strong as initially expected. And any signs of economic weakness are interpreted as a possible signal that policymakers will slow the pace of interest rate increases. It is expected that the expectation of a temporary stop or reduction of interest rates will affect the dollar and support gold prices.

At the same time, the World Gold Council reported that global gold exchange-traded funds saw another monthly outflow in August with total assets under management falling by US$3 billion (46 tonnes), with the majority coming from US-listed funds. The net long positions of managed funds in Comex fell to their lowest level in five months, before ending the month at 181 tons. The daily trading volumes outside the stock exchange remained high at 143 billion US dollars per day.

Today's XAU/USD Gold Price Predictions:

  • According to the performance on today's chart below, the price of gold XAU/USD gives up the gains of the last upward channel.
  • Breaking the $1900 support will strengthen the bears' control over the direction.
  • If that happens, the next most important support will be $1885 per ounce, which is ideal to start buying from or below it.

Despite the performance of the US dollar, gold receives a positive boost from other sources, consisting of the suspension and pace of tightening by many global central banks, as well as the demand for it as a safe haven amid global geopolitical tensions and fears of a global recession led by China.

The bulls pushed the price of gold XAU/USD towards the resistance of $1945 per ounce to return to the path of the ascending channel. Today, gold will be affected by the level of the dollar, the Chinese trade figures, the number of American jobless claims and a round of statements by the policy officials of the American Federal Reserve Bank.

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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.