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Asset Watch

Gold price may rally further if it breaks above these levels

Tuesday, July 18, 2023

Gold Prices, Chart and Analysis

• The US dollar price direction hinges on today data release
• Gold bullish momentum decelerates, key levels to watch

 

The gold price has rallied to a multi-week high today at $1964/oz. The precious metal benefited from the US dollar’s retreat last week on the back of a cooler-than-expected inflation report. The US headline CPI of June dropped to 3.0% while the core CPI fell to 4.8%. As a result, the value of the greenback weakened as investors interpreted this as a sign that the Fed was approaching the end of its rate hiking cycle.

All eyes will be on the US retail sales report today which forecasts an increase from 0.3% in May to 0.5% in June. Therefore, any higher-than-expected data may increase inflation levels and keeps more than one rate hike probabilities in 2023 on the table (this scenario is positive for the US dollar price and negative to the gold price) while a lower-than-expected data means that the Fed could end the rate hiking cycle with the one that the FOMC may announce in the July meeting.

Gold Daily Price Chart

 

Chart source ADSS Platform

 

On July 12, the gold price broke above the bullish trendline originating from the June 2 high at 1983 and broke above the inverted head and shoulders neckline located at 1933 then closed later above the 50-day simple moving average in multiple occasions however could not close above 1960 indicating a weaker upward momentum.
Hence, a daily close above 1960 indicates that the price may rally towards 1974 and a daily close above that level signals stronger bullish momentum that may lead the yellow metal towards the $2000/oz threshold. That said, the resistance level residing at 1981 should be kept in focus.

On the other hand, a daily close below 1949 reflects a weaker bullish momentum and could encourage traders to revisit the inverted head and shoulders neckline and a daily close below that level invalidate that pattern and could send the price even lower towards 1916 and 1911 respectively.


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