XAU/USD poised for more upside despite triple top pattern
Positive risk appetite has been driving equities higher after last week’s selloff but continued geopolitical tensions in the Middle East have been limiting the losses in gold. The precious metal is up over 2.5% in the past week supported by fears of broader regional conflict in the area alongside an increase in expectations for a dovish Federal Reserve following weakening US data.
Wednesday’s July CPI will be a key driver in markets. Headline inflation is expected to have remained unchanged at 3% whilst core inflation is seeing softening slightly from 3.3% to 3.2%. If the data comes in softer than expected it could reaffirm the fact that the Fed made the wrong decision in June and now the economy is showing clear signs of slowing, and therefore a 50bps cut in September is the only way to go. If so, we could see recession concerns reignited, which could strengthen the recent bid in gold. Alternatively, a stronger reading could unwind some of the expectations of rate cuts weighing on the appetite for safe haven assets like gold, although, as mentioned above, the ongoing political tensions could limit the losses.
On the chart, XAU/USD remains poised to the upside but there is a risk of a correction if resistance continues at $2,477, which would confirm the triple top pattern. For now, buyers seem engaged in the rally as price remains above all four of its key moving averages and the RSI is moving higher. If the US CPI serves as a catalyst for selling pressure, there is a good amount of support levels in focus up ahead, but $2,350 could be the key level for sellers looking for a sustained reversal.
Wednesday’s July CPI will be a key driver in markets. Headline inflation is expected to have remained unchanged at 3% whilst core inflation is seeing softening slightly from 3.3% to 3.2%. If the data comes in softer than expected it could reaffirm the fact that the Fed made the wrong decision in June and now the economy is showing clear signs of slowing, and therefore a 50bps cut in September is the only way to go. If so, we could see recession concerns reignited, which could strengthen the recent bid in gold. Alternatively, a stronger reading could unwind some of the expectations of rate cuts weighing on the appetite for safe haven assets like gold, although, as mentioned above, the ongoing political tensions could limit the losses.
On the chart, XAU/USD remains poised to the upside but there is a risk of a correction if resistance continues at $2,477, which would confirm the triple top pattern. For now, buyers seem engaged in the rally as price remains above all four of its key moving averages and the RSI is moving higher. If the US CPI serves as a catalyst for selling pressure, there is a good amount of support levels in focus up ahead, but $2,350 could be the key level for sellers looking for a sustained reversal.
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