Gold, XAU/USD – price action:
- XAU/American dollar It fell below the key support level.
- The hawkish rhetoric from the central bank and the improvement in risk sentiment are having an impact gold.
- How low can XAU/USD go?
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Gold’s drop below a key support level on Thursday confirms that several weeks of bullish pressure has faded as hawkish central bank rhetoric and an improvement in broader risk sentiment diminished the yellow metal’s safe-haven appeal.
After holding out for weeks above support, XAU/USD fell below 1930, including the end-May low, the 89-day moving average, and the lower edge of the Ichimoku cloud — a risk highlighted in Thursday’s update. See “Gold Price Action: XAU/USD Weakens After Powell’s Comments,” posted on June 22.
XAU/USD 240 minute chart
Chart by Manish Gradi using TradingView
Two possible price targets come from the recent price action. On the hourly chart, a break below the horizontal trend line from the end of May created a slight descending triangle, with a price target around 1890.
On the daily charts, the rebound at the beginning of the month was weak, recovering only 38.2% of the May drop. The May volatility-weighted price target would suggest a drop towards the 200-day moving average (now at around 1852).
XAU/USD daily chart
Chart by Manish Gradi using TradingView
Powell reiterated the central bank’s hawkish stance saying more rate hikes may be needed, adding that interest rates will move at a “delicate pace” from here. “We’re at least close to where we think our destination is…,” Powell said at a hearing before the Senate Banking Committee on Thursday.
XAU/USD daily chart
Chart by Manish Gradi using TradingView
Powell added a bit more color skipping through June, saying that the “point” of keeping interest rates steady was precisely to slow the speed at which the Fed raised borrowing costs. Separately, Fed Governor Michelle Bowman said on Thursday that more interest rate increases are needed, indicating that at least two more increases are warranted. Moreover, the Bank of England surprisingly raised interest rates by 50 basis points on Thursday (25 basis points expected), suggesting that global central banks’ fight against inflation is far from over.
XAU/USD daily chart
Chart by Manish Gradi using TradingView; Refer to the notes at the bottom of the page.
The trend on the intraday charts continues to go down, as the 240-minute color candlestick charts show. More importantly, XAU/USD broke below the daily chart’s Ichimoku Cloud Cover and the 89-day moving average for the first time since the end of 2022. Also, this coincides with a break below the ascending trend line from November, which confirms that the upward pressure is waning. at present.
It appears that a large part of the current weakness is an indirect effect of what is happening on the charts with higher timeframes, as shown in recent months. See “Gold Could Find Difficulty Breaking $2000,” posted on March 28, and “Weekly Gold Outlook: Time to Be Cautious on XAU/USD?” Posted April 16th. Subsequent updates can be found here: April 24th, May 10th, May 17th, May 31st, and June 8th.
Note: The above color-coded chart(s) are (are) based on trend/momentum indicators to reduce subjective biases in trend identification. It is an attempt to separate the bullish and bearish phases, and consolidate within a trend-versus-trend reversal. The blue candles represent a bullish stage. Red candles represent a bearish phase. Gray candlesticks act as consolidation phases (during a bullish or bearish phase), but they sometimes tend to form at the end of a trend. Candle colors are not predictive – they only indicate the current trend. In fact, the color of the candle can change in the next bar. False patterns can occur around the 200-period moving average, around support/resistance and/or in a sideways/volatile market. The author does not guarantee the accuracy of the information. Past performance is not indicative of future performance. Users of the information do so at their own risk.
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– Posted by Manish Grady, Strategist for DailyFX.com
Connect with Jaradi and follow her on Twitter: @JaradiManish