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Asset Watch

Gold Price Retreats on a stronger US Dollar

 

Tuesday, August 01, 2023

Gold Prices, Chart and Analysis

• Gold price upward momentum loses steam
• The yellow metal price develops a reversal pattern

 

The gold price bullish trend has lost momentum, mainly due to the strengthening of the US dollar. The greenback benefited from lower expectations of an economic recession in the US this year based on the positive GDP (Q2) data, which showed growth at 2.4% combined with expectations that the Federal Reserve has neared the end of its rate hike cycle.

Investors are eagerly awaiting the US ISM Manufacturing Purchasing Managers’ Index data for July, with expectations set at 46.8. If the actual data exceeds these expectations, it may cause the dollar’s value to rise, resulting in a potential decline in gold prices. Furthermore, later in the week, the market will focus on the US jobs report of July, which is expected to show an addition of around 200,000 jobs to the US economy. A lower-than-expected job creation figure would signal a slowdown in job growth and reduces the likelihood of raising interest rates the FOMC September meeting and this, might contribute to a higher gold price.

Apart from these factors, the decline in gold prices has also been influenced by reduced demand from some central banks, as reported by the World Gold Council. This reduced demand has been attributed to the tightening of monetary policies by these institutions.

As always, the gold market is subject to various economic and geopolitical factors, and investors should keep a close eye on relevant data and news to make informed decisions.

Gold Daily Price Chart

 

Chart source ADSS Platform

 

On July 20 the gold price rallied to a multi-week high at $1987/oz then retreated as some traders took profits. Currently, the price trades above the 50-day simple moving average located at 1946 and develops an inverted head and shoulders pattern signalling a possible reversal. A break above the neckline of the mentioned pattern residing at 1984 could send the price even higher towards the May 10 high at 2048. That said, the resistance levels located at 2001, 2010, 2023 and 2041 should be considered.

On the other hand, a daily close below 1949 could send the price towards 1933. However, the support level located at the 50-day simple moving average at 1946 should be kept in focus.


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