XAU/USD, or the trade of gold in opposition to the US greenback, had a troublesome week. It fell under the even 20 Simple Moving Average (SMA), an important development in its trajectory. At time of writing, the gold price has fallen to $3,207.82, its lowest level in almost two weeks. Proving to be a headwind against an overall theme of returning market optimism, traders are looking ahead to important economic indicators. They have been especially glued to the US Consumer Price Index (CPI), which is slotted for release on Tuesday.
The next CPI report due out August 10 will likely confirm that inflation is stabilizing. Economists expect an annual rate of 2.4%. In addition, analysts are forecasting a 0.3% month-over-month increase. This information will be essential for all market participants. They will use it to assess future framework monetary policy implications as well as the broader economic context.
Even after this turn down, XAU/USD is holding above the bullish 100 then 200 SMAs by a wide margin. Notably, these moving averages have served as powerful support zones for gold prices in the past. XAU/USD is now struggling to hold above a slightly bullish 200 SMA on the 4-hour chart. That constitutes mighty resilience and important strength in light of a lot of recent turbulence.
At the weekly open, XAU/USD gapped lower, making its move below $3,207.82 much more realistic. This price point is doubly important seeing that it’s the lowest point in almost two weeks. It further moves the gold price within striking distance of the May monthly low of $3,202.03. While trading above this threshold, a breach would leave it vulnerable to a deeper drop to the support level of $3,202.00.
Market pundits have named important support levels for XAU/USD at $3,202.00, $3,187.20, and $3,176.45. On the other hand, resistance levels stand at $3,234.40, $3,248.50, and $3,263.85 respectively. Given the volatility that’s been prevalent across markets in recent weeks, traders seem to be focused on these lines in the sand as they position themselves.
Beyond fundamental and technical analysis, momentum indicators like the Relative Strength Index (RSI) provide an insight into prevailing market sentiment. At present, the RSI hovers at just under 29 and doesn’t appear to be near a downward exhaustion point. This could be indicative of continued selling pressures, but perhaps some room for a recovery if buying interest comes back to life.
Since last week, the 20 SMA has crossed under the 100 SMA at the $3,320 region, forming a bearish cross. This latest move seriously muddies the waters for XAU/USD outlook. While the fundamental trends remain strong, this technical signal points to a potential weakening trend that may inspire more cautious trading behavior in the short term.