Gold Price Analysis: XAU/USD sellers poke $1,784 support on Fed, China jitters

Gold Price retreats towards 16-month-old support as US inflation fuel recession woes

  • Gold price remains pressured around intraday low, extends pullback from one-month high.
  • US dollar traces Treasury yields as Fed policymakers reject post US CPI optimism.
  • Headlines surrounding China also underpin the US dollar’s safe-haven demand.

Gold price (XAU/USD) holds lower grounds near intraday bottom surrounding $1,784 as bears attack the 50-DMA heading into Thursday’s European session. In doing so, the precious metal respects the US dollar’s latest rebound amid mixed concerns surrounding the US Federal Reserve’s (Fed) next move and China.

That said, the US Dollar Index (DXY) pares the biggest daily loss in five months, up 0.20% intraday near 105.45 by the press time, as Fed policymakers fail to cheer Wednesday’s softer US Consumer Price Index (CPI) for July, down to 8.5% on YoY in July versus 8.7% expected and 9.1% prior.

Mary Daly, President of the San Francisco Fed recently hesitated to declare victory over inflation. In doing so, the policymaker joined the likes of Minneapolis Fed President Neel Kashkari and Chicago Fed President Charles Evans. Previously, Fed’s Kashkari mentioned that he hasn’t “seen anything that changes” the need to raise the Fed’s policy rate to 3.9% by year-end and 4.4% by the end of 2023. Further, Fed policymaker Evens stated, “The economy is almost surely a little more fragile, but would take something adverse to trigger a recession.” Fed’s Evans also called inflation “unacceptably” high.

In addition to this, talks surrounding China also weigh on the XAU/USD prices due to the Dragon Nation’s status as among the world’s biggest gold consumers. Reuters relied on sources to mention that the saying US President Biden rethinks steps on China tariffs in wake of Taiwan response. Additionally, a jump in the coronavirus cases from China, to 700 new confirmed cases in the mainland on August 10 versus 444 a day earlier, also weighs on the gold price. Furthermore, China Customs’ latest rejection of US meat from a specific producer and comments from the Taiwan Foreign Ministry, suggest rejection of China’s motto of ‘One country, Two systems’, also weigh on the bright metal prices.

Against this backdrop, S&P 500 Futures print mild gains near 4,220 by the press time after Wall Street rallied and the US Treasury yields remained mostly unchanged the previous day.

Looking forward, US Jobless Claims and the monthly Producer Price Index (PPI) for July. Furthermore, Friday’s preliminary readings of the US Michigan Consumer Sentiment Index for August will also be important for fresh impulse.

Technical analysis

A clear downside break of the three-week-old ascending support line, now a resistance line around $1,795, joins the RSI retreat and the MACD’s easing bullish bias to tease the XAU/USD bears.

However, a daily close below the 50-DMA support surrounding $1,784 appears necessary for the gold price to extend the latest weakness towards the 23.6% Fibonacci retracement level of April-July downside, near $1,755.

On the contrary, an upside clearance of the $1,795 support-turned-resistance isn’t an open call to the gold buyers.

The reason is the existence of a downward sloping resistance line from late April, around $1,824.

Gold: Daily chart

Trend: Further weakness expected


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