Gold price prediction:
- gold prices Falling as US yields resume their recovery after better-than-expected data
- U.S. dollar Strength also affects precious metals
- This article looks at the XAU switch /American dollarTechnical levels to watch in the coming days
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After a strong performance earlier in the week, gold prices (XAU/USD) retreated on Thursday, dropping around 0.5% to $1,967, dragged down by higher US bond yields and stronger US dollar after better-than-expected US economic numbers.
In the morning, a Labor Department report showed that the number of Americans filing for unemployment benefits fell unexpectedly in the week ending July 15, falling to 228,000 from 237,000 previously versus 242,000 expected, marking the lowest level since mid-May, in a sign that large-scale layoffs have yet to happen.
The benign labor market data sent US Treasury yields skyrocketing, particularly those at the front end of the curve, boosting the US dollar in the process. Traders speculated that the remarkable resilience of the US economy will prompt the Federal Reserve to tighten again in the fall and keep interest rates higher for longer in its battle against inflation.
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We’ll have more information to assess the Fed’s roadmap next week when the central bank announces its monetary policy decision, but one thing is clear: if the institution signals that more work is needed to restore price stability and signals support for further tightening, gold could be on the offensive.
Focusing on next week’s FOMC meeting, the Bank is expected to raise its key interest rate by 25 basis points to a range of 5.25% to 5.50%, the highest level since 2001. This scenario is already fully priced in, so the important thing for the markets will be the outlook. If guidance remains hawkish, expectations for the final interest rate could rise, creating a hostile environment for precious metals.
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Economic events coming to the United States
source: DailyFX Economic Calendar
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change in |
Longs |
Shorts |
Hey |
| Daily | -1% | -5% | -3% |
| weekly | -1% | -10% | -4% |
Technical analysis of gold prices
Gold ended its rebound and moved lower after failing to clear technical resistance at ~$1,985 earlier in the week, an area that halted advances on several occasions in May, June and this month.
After this rejection, XAU/USD started to retreat towards the trend line support at ~$1.965, as seen on the 4-hour chart below. While prices may establish a base around these levels before resuming their climb, a breakdown could reinforce bearish pressure, paving the way for a move towards $1,945, followed by $1,935.
On the flip side, if buyers regain control of the market and trigger a bullish reversal, initial resistance appears at ~$1,973 and ~$1,985 after that, as mentioned earlier. A successful drive above this barrier could revive the bullish momentum, creating the right conditions for a rally towards the psychological $2000 mark, which is also in line with the 61.8% Fibonacci retracement of the May/June sell-off.