Gold Price Forecast: XAU/USD appears frail near $1,900 on China woes, Fed Minutes eyed
- Gold Price stays defensive at key technical levels, pressured around multi-day low of late.
- XAU/USD fails to cheer US Dollar’s previously sluggish moves, risk aversion amid China economic woes.
- Greenback struggles to cheer upbeat United States Retail Sales, hawkish Fed talks ahead of Federal Reserve Monetary Policy Meeting Minutes.
- Hawkish Fed Minutes needed to break $1,890 support and welcome Gold bears with open hands.
Gold Price (XAU/USD) remains pressured at $1,901 amid the early hours of Wednesday’s Asian session as it reverses late Tuesday’s corrective bounce off the lowest level in seven weeks amid a cautious mood. That said, China-induced risk aversion joined upbeat United States data and hawkish Federal Reserve (Fed) talks, as well as fears of witnessing credit rating downgrade of major US companies, weighed on sentiment and the XAU/USD the previous day. That said, the bullion initially rebounded on early Tuesday amid the market’s consolidation ahead of today’s Monetary Policy Meeting Minutes of the Federal Open Market Committee (FOMC).
Gold Price stays bearish on firmer United States data, China fears
Gold Price occupies its permanent seat on the bear’s radar despite the previous day’s short-lived bounce as markets’ sour sentiment, especially backed by China, join firmer United States Retail Sales data and hawkish comments from a Federal Reserve (Fed) official.
On Tuesday, downbeat China data and the People’s Bank of China’s (PBoC) surprise rate cuts renew economic fears about the world’s second-largest economy and weighed on the Gold Price. The People’s Bank of China (PBOC), surprised markets by lowering the one-year Medium-term Lending Facility (MLF) rate to 2.50% from 2.65% previous and the Standing Lending Facility rates (SLFs), as well as by cutting the Reverse Repo Rate to 1.8% from 1.9% previously. The same joined China’s downbeat July Retail Sales that rose 2.5% YoY vs. 4.8% expected and 3.1% previous, as well as the Industrial Production that came in at 3.7% YoY vs. 4.5% estimated and 4.4% prior, to flag the fears surrounding the Dragon Nation and fuel the DXY.
On the other hand, the US Retail Sales grew 0.7% MoM in July versus 0.4% expected and 0.3% reported in June (revised from 0.2%). The details suggested that the Core Retail Sales, namely the Retail Sales ex Autos, grew 1.0% versus 0.4% market forecasts whereas the Retail Sales Control Group doubled from 0.5% previous readouts (revised from 0.6%) to 1.0% for the said month. Further, the US NY Empire State Manufacturing Index slumped to -19.0 from 1.1 prior and -1.0 market forecasts while the US Export Price Index and Import Price Index improved on MoM in July but edged lower on a yearly basis for the said month.
Late Wednesday, Minneapolis Federal Reserve President Neel Kashkari ruled out talks of policy pivot by citing hot inflation and the uncertainty about the Fed’s progress in taming the same. The policymaker also said that he is not ready to say that the Fed is done raising rates, per Reuters.
Apart from that, the Analysts at the global rating agency Fitch Ratings told CNBC on Tuesday that the agency could downgrade several big lenders, including JPMorgan, as reported by Reuters, which in turn bolstered the risk aversion and favored the Gold sellers.
With this, the US Dollar Index (DXY) regains the upside momentum, despite poking the key resistance surrounding 103.30 of late, while Wall Street closed in the red and the US 10-year Treasury bond yields refreshed the yearly high. It should be noted that the S&P500 Futures remain lackluster by the press time.
Fed Minutes can convince XAU/USD bulls on confirming policy pivot
Looking forward, the Gold Price braces for further downside as it pokes the short-term key technical supports. However, the XAU/USD bears need validation from China data and the Federal Reserve (Fed) monetary policy meeting minutes, as well as the bond yields. Should the fears about China remain on the table and the yields stay firmer, backed by hawkish statements from the Fed Minutes, the Gold Price may drop to the sub-$1,900 zone.
Gold Price Technical Analysis
Gold Price seems fragile as it floats near a seven-month-old horizontal support zone of around $1,890 and the 200-DMA level of around $1,905.
Also challenging the XAU/USD bears is the Relative Strength Index (RSI) line, placed at 14, which stays beneath the 50.0 level and suggests bottom-picking.
However, the Moving Average Convergence and Divergence (MACD) signals are bearish as the metal remains below the $1,940 resistance confluence, comprising the previous support line stretched from November 2022 and the 50-DMA, which turn prod the XAU/USD sellers.
Hence, the quote’s corrective bounce appears lucrative but has a limited upside room, unless breaking the $1,940 hurdle.
Following that, a downward-sloping resistance line from early May, close to $1,960 at the latest, will act as the last defense of the XAU/USD bears.
On the contrary, a downside break of the $1,890 support will make the Gold Price vulnerable to slump toward an early March swing high of around $1,858.
Gold Price: Daily chart
Trend: Corrective bounce expected