XAU/USD, the trading pair for gold against the US dollar, has become weak recently. At the moment, it’s trading under each of its moving averages. Since Thursday morning, the stock has essentially been in a dime intraday range. When long-term economic indicators and/or investor sentiment change, market dynamics move quickly. For the last month or so, gold prices have been under pressure. This move comes in the wake of a surprise jump in the US Producer Price Index (PPI) in July, sparking a new wave of risk aversion among investors.
The 20 Simple Moving Average (SMA) for XAU/USD is downward pointing. It is now sitting slightly under a flat line that serves as dynamic resistance around the $3,357 level. This highly technical environment has been reflective of a very risk averse market. 20 SMA is cramped between the directionless 100 and 200 SMAs, illustrating the indecision in the marketplace. The 100 SMA, though still grinding higher, seems to be losing steam as it curls around the $3,301.80 barrier.
Analysts in the markets watch as XAU/USD puts the pressures a new weekly low near $3,330 mark. The decline has only deepened. Demand for the US dollar spiked throughout the American trading session on Thursday. As a result, demand for this currency has pushed risk for XAU/USD strongly in the positive direction. That’s a bad sign — it’s an indicator that bigger declines might be coming.
Technical indicators for XAU/USD aren’t leaning too far one way or the other, suggesting the market is devoid of any serious directional bias. At the same time, the RSI has begun to point slightly downwards, warning of possible future selling pressure. The present support levels are 3,328.10, 3,312.25, and 3,301.80 for XAU/USD. On the other hand, the resistance levels are 3,350.00, 3,372.30, and 3,389.85.
As market participants wrestle with incoming economic data and uncertainties related to geopolitical risks, the outlook for XAU/USD seems cautiously bearish. Industry analysts are suggesting the trading pair has further to fall. If it continues to follow the same pattern, it’s on track to test that key support level of $3,300.