Gold at key support,  will it rebound or extend recent fall?

Gold at key support, will it rebound or extend recent fall?

Gold prices retreated yesterday, after U.S. inflation figures for last month. As the U.S. dollar and bond rates held steady, gold continued to be on track to end its worst week in seven.

The precious metal attempts a cautious trade on worries that inflation remains sticky amid rising rental prices.

Gold almost hit a one-month low of 58725 before stabilising at 58853. After statistics revealed that the U.S. consumer price index (CPI) rose less than anticipated in July, prices fell as speculation increased that the Fed is unlikely to raise interest rates again in 2023.

The US inflation rate climbed steadily at a rate of 0.2%, matching the Fed’s target inflation rate of 2%. While headline inflation slightly increased to 3.2% from the previous announcement of 3.0% but remained below the consensus forecast of 3.3%, core annual CPI fell to 4.7% from estimates and the preceding publication of 4.8%.

Depending on how the economy’s inflation rate develops, officials John Williams and Patrick Harker, along with San Francisco Fed President Mary Daly, have thrown open the possibility of discussions about rate cuts in 2024.

A blowout in the U.S. budget deficit last month and weak demand at a 30-year Treasury auction also weighed on bonds, and their higher yields in turn pushed the dollar up – particularly against a yen pinned by yield control in Japan. In addition, the U.S. dollar jumped to a month high of 102.6540 against its major counterparts.

Prices are currently trading in a neutral range as we await the release of the July Producer Price Index (PPI) data, which will provide additional direction. The improvement in petrol prices may cause the PPI headline figure to increase.

Technical Outlook

Since the start of the month, Gold prices retreated from the peak of 59930 and yesterday they dropped towards 58725. The price settled at 58935 with a minor gain of 0.14%.

On the above chart, Prices were able to hold above crucial support of 58630.00 coinciding with 23.6% Fibonacci Retracement levels. However, prices are still trading below their Short term SMA.

Near future trends expect to remain indecisive as its news-based market movements. Today, Core PPI and Consumer Sentiment are set to release which will give further direction.

On the downside, crucial support is seen at 58630 and a break below only prices will extend recent bearish moves and could test 58200-58200.

Alternatively, any dip towards 58750-58700 could attract short covering. Prices may recover towards 59100-59350.00.