Gold Prices Forecast: U.S. Dollar Surge, China’s Economy Pressure XAU/USD Prices

Highlights

• Gold prices decline with strengthening U.S. dollar.
• China’s economic concerns influence global markets.
• U.S. retail sales data eagerly awaited by XAU/USD investors.

Overview

Gold prices saw a downturn on Tuesday, primarily influenced by the U.S. dollar’s rise, bolstered by higher bond yields and concerns surrounding China’s economy. As investors anticipate U.S. retail sales data, they are keen to understand the possible effects of increased rates on consumer spending.

Gold Hovering Near 6-Week Low

Spot gold (XAU/USD), trading close to its lowest in a month and a half, declined 0.06% to touch $1,905.44 per ounce. Similarly, U.S. gold futures experienced a drop, settling 0.3% lower at $1,937.80. The dominant force pushing down gold prices was the strengthening U.S. dollar and a surge in Treasury yields. This upward trend in the dollar and yields has been attributed to investors’ speculations on how Chinese regulators might address the rising financial and property risks, as highlighted by NAB Commodities Research.

China’s Economic Instability Lifts US Dollar

On the back of concerns regarding China’s economic stability, the U.S. dollar reached its pinnacle in over a month. This, paired with U.S. 10-year Treasury yields nearing their November highs, makes gold an expensive purchase for foreign investors. Compounding these concerns, China’s central bank took the market by surprise, reducing its key policy rates after witnessing lagging industrial output and retail sales growth.

Sights Set on US Retail Sales

All eyes are now set on the impending U.S. retail sales data and insights from the Federal Reserve’s July policy meeting due to be released shortly. Despite the recent rate increase in July 2023, market experts predict a shift to a softer stance only by 2024.

Short-Term Forecast:  Weak

In the near future, gold is likely to remain under pressure. With the U.S. dollar maintaining its strong position and ongoing worries about China’s economy, gold’s allure seems to be waning. This sentiment is further echoed by the SPDR Gold Trust, the world’s foremost gold-backed ETF, which reported a decline in its holdings to its lowest since the start of 2020.

Technical Analysis

Starting with the price dynamics, Gold (XAU/USD) is currently priced at 1905.03, showing a slight decline from the previous 4-hour mark of 1906.66.

When examining the 200-4H moving average (1940.50), the current price is trading below it, signaling a potential bearish sentiment. Additionally, the commodity’s price is also below the 50-4H moving average of 1963.27, further reinforcing the bearish outlook. The 14-4H RSI, sitting at 33.20, indicates that the market is nearing oversold conditions but still has room before hitting extreme levels.

With the price hovering just above the main support area of 1902.75 and well below the main resistance range of 1946.99 to 1954.88, this paints a bearish picture for the XAU/USD market in the near term.