On July 18th, our analysis from last Friday suggested that renewed oil price strength, driven by Middle East tensions and reaching a one-month high, coupled with a hawkish Federal Reserve stance, overshadowed the cooling US June inflation data. A resilient US dollar exerted pressure on gold, with short-term technical indicators also pointing to a risk of further declines. For trading, resistance was identified near $3990 and $4016, while support levels were seen at $3943 and $3900.
Subsequent price action saw gold stabilize around $3970 after the Asian session open last Friday, rebounding to encounter resistance near $4008, maintaining a range-bound pattern. Following the US market open, gold briefly dipped to a half-month low of $3959 before quickly finding support and rebounding. After testing the $3990 support level multiple times, it stabilized and rose to a daily high of $4023. Gold is currently trading around $3996. Overall, gold faces pressure in its short-term fluctuations; while declines have been limited, the rebound has also been relatively weak.
A Wolfinance star analyst notes that recent gold price action has been pressured and range-bound, with limited downside. This is primarily due to cooling US inflation data, as both June CPI and PPI figures fell short of expectations and prior readings, dampening market expectations for further Fed rate hikes and providing support for gold. Concurrently, short-term gold rebounds have lacked momentum. This is partly because escalating Middle East tensions have pushed oil prices to a one-month high. Elevated oil prices fuel inflation expectations, reinforcing market expectations that the Fed will maintain high interest rates for a longer period. Additionally, while June inflation data showed a decline, largely due to lower energy prices, the recent rebound in oil could potentially drive CPI and PPI higher again. The Fed Chair has also stated that the June CPI cooling does not signify the inflation battle is over, which has capped gold's rebound potential.
On the daily chart, gold is under pressure and oscillating near its six-month low, exhibiting relative short-term weakness. Key support levels to watch include last week's low of $3959, which is also near the lower Bollinger Band on the 4-hour chart, followed by the six-month low of $3943, near the daily chart's lower Bollinger Band. A break below these levels would increase the risk of a short-term decline, with the $3900 psychological level being the next support to watch. On the upside, resistance can be seen near last Friday's rebound high of $4021, which aligns with the daily 5-day moving average and the 4-hour chart's Bollinger Band midline, followed by the area near the daily 10-day moving average and the daily Bollinger Band midline around $4060. The 5-day MA death cross is slowing slightly, the MACD indicator shows a slight bullish crossover, the KDJ indicator's death cross is turning up slightly, and the RSI indicator shows a slight bearish crossover, all residing in weak territory. Short-term technical indicators suggest bears are generally in control, with risks of continued pressured declines.
Intraday Gold Outlook: Despite cooling inflation providing a temporary reprieve for gold's decline, rising oil prices from Middle East tensions and the Fed's hawkish stance continue to suppress prices. A range-trading approach is recommended. Upside resistance is noted near $4021 and $4060, while downside support is seen at $3959 and $3943, followed by $3900.
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