The price of gold, currently at 1,947.11 in XAUUSD, is recovering from a significant drop, the largest in two months. This decline was influenced by a stronger US Dollar. According to the perspective of @nehcap, it is anticipated that there will be more downward movement in the future.

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• Gold Price licks its wounds after falling the most in eight weeks amid firmer US Dollar.

The pair currently trades last at 1947.11.

The previous day high was 1978.39 while the previous day low was 1962.06. The daily 38.2% Fib levels comes at 1972.15, expected to provide resistance. Similarly, the daily 61.8% fib level is at 1968.3, expected to provide resistance.

Gold Price (XAU/USD) steadies around the mid-$1,900s amid the early hours of Friday’s Asian session, after posting the biggest daily slump in two months the previous day. In doing so, the XAU/USD portrays the market’s consolidation ahead of the top-tier US data following a whippy day that initially propelled the Gold Price towards the weekly top on the softer US Dollar and risk-on mood before drowning it on the strong United States data and firmer Treasury bond yields.

Gold Price aptly justified the word “turnaround Thursday” as it initially rose to the highest levels in a week while poking a 2.5-month-old horizontal resistance before breaking a multi-day-old support line. It’s worth noting that the XAU/USD remains defensive around the 21-DMA level near $1,945 by the press time.

That said, the market’s easing fears of the Federal Reserve’s (Fed) rate hike and upbeat China Industrial Profits, as well as hopes of more stimulus from Beijing, fuelled the Gold Price to refresh the weekly top. However, strong prints of the United States data and upbeat yields drowned the XAU/USD afterward. On the same line could be the dovish hike of the European Central Bank (ECB) and the cautious mood ahead of the Fed’s preferred inflation data.

On Thursday, the preliminary readings of the US Gross Domestic Product (GDP) Annualized for the second quarter (Q2) improved to 2.4% from 2.0% prior, versus 1.8% market forecast. On the same line, the US Durable Goods Orders also jumps 4.7% for June compared to 1.0% expected and 1.8% expected (revised). Additionally, Initial Jobless Claims declines to 221K for the week ended on July 21 versus 235K prior and analysts’ estimations of 228K. It should be observed that the US Pending Home Sales for June also improved to 0.3% MoM versus -0.5% expected and -2.5% prior (revised).

However, the first estimations of the US Q2 Core Personal Consumption Expenditure eases to 3.8% QoQ from 4.9% prior and 4.0% market forecasts whereas GDP Price Index edges lower to 2.6% from 4.1% previous readings and 3.0% expected.

That said, the European Central Bank (ECB) matches market forecasts by announcing 25 basis points (bps) increase in the benchmark rates. That said, the policy statement showed the board is “open-minded” about further tightening. However, the statement dumped reference to the need to bring the rates to a level that cuts inflation quickly enough and gained the attention of the Euro bears, especially when backed by ECB President Christine Lagarde’s comments stating, “The wording change in the statement was not random or irrelevant.” On the same line, ECB’s Lagarde also signaled the nearness to the end of the inflation battle by suggesting smaller grounds to cover while also showing data-dependency of the next rate decision as well. It’s worth noting that the Euro’s slump strengthens the US Dollar and weighs on the Gold Price.

Amid these plays, US Dollar Index (DXY) posted the biggest daily jump since March 15 the previous day, not to forget mentioning a stellar rebound from the weekly low, as the US statistics recall the Fed hawks and bolstered the Treasury bond yields. It’s worth noting that the Wall Street benchmarks closed with nearly half a percent of daily losses whereas the benchmark US 10-year Treasury bond yields marked the biggest daily jump in a month to refresh a three-week high near 4.02%, close to 4.0% by the press time.

Looking ahead, the risk catalysts may entertain the Gold traders ahead of the Fed’s favorite inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index for June, expected 4.2% YoY versus 4.6% prior, will be crucial to watch for clear directions.

Also read: PCE Inflation Preview: Price pressures set to fade in Fed favorite figures, US Dollar to follow suit

Gold Price justifies multiple failures to cross the 10-week-old horizontal resistance, as well as the downside break of an upward-sloping support line from late June, while welcoming the bears after their three-week vacation.

Also favoring the XAU/USD sellers is the looming bear cross on the Moving Average Convergence and Divergence (MACD) indicator, as well as the Relative Strength Index (RSI) line’s pullback.

It’s worth noting, however, that a sustained downside break of the 21-DMA support surrounding $1,945 becomes necessary for the Gold bears to keep the reins. Even so, a slew of peaks and troughs marked since mid-June around $1,930-25 can test the XAU/USD sellers before directing them to the yearly low registered the last month around $1,893.

On the flip side, a daily closing beyond the support-turned-resistance line of around $1,955 may allow the Gold Price to pare weekly loss, if backed by the aforementioned United States inflation clues.

However, the 38.2% Fibonacci retracement level of the metal’s May-June downside and the previously stated 2.5-month-old horizontal resistance, respectively near $1,965 and $1,985, will challenge the Gold buyers before giving them control.

Overall, the Gold Price is likely to witness further downside but the road towards the south is long and bumpy.

Trend: Further downside expected

Technical Levels: Supports and Resistances

XAUUSD currently trading at 1946.53 at the time of writing. Pair opened at 1972.17 and is trading with a change of -1.30% % .

The pair is trading above its 20 Daily moving average @ 1944.52, below its 50 Daily moving average @ 1947.2 , below its 100 Daily moving average @ 1964.53 and above its 200 Daily moving average @ 1884.5

The previous day high was 1978.39 while the previous day low was 1962.06. The daily 38.2% Fib levels comes at 1972.15, expected to provide resistance. Similarly, the daily 61.8% fib level is at 1968.3, expected to provide resistance.

Note the levels of interest below:

• Pivot support is noted at 1963.36, 1954.54, 1947.03
• Pivot resistance is noted at 1979.69, 1987.2, 1996.02

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