- Gold is up more than 1% on Thursday.
- Next target on the upside is located at $1,845.
- USD continues to have a hard time finding demand following disappointing data releases.
Update: Gold (XAU/USD) prints the heaviest daily gain in 11 weeks, despite recently easing from the monthly top, by the end of Thursday’s North American trading session. That said, the yellow metal jumped to $1,832.70 before stepping back near $1,828.50 by the press time.
Strong gains of the gold prices could be linked to the US dollar’s performance and a broad optimism in the market.
The US Dollar Index (DXY) dropped to a one-month low, posting a four-day losing streak, before closing around 91.91 with 0.39% daily losses. In doing so, the greenback gauge ignores the three basis points (bps) of an upside by the US 10-year Treasury yields to 1.266%. On the same line, the Wall Street benchmarks also posted mild gains by the end of the day’s trading.
After the Fed’s resistance to discuss tapering, downbeat US Gross Domestic Product (GDP) figures for Q2 and other US data justified the need for tapering and propelled market sentiment. The preliminary reading of the US Q2 GDP dropped below 8.4% expected to 6.5%, versus 6.4%, quarterly while the Pending Home Sales for June eased and weekly Jobless Claims also jumped.
Other than the data, chatters over US President Joe Biden’s infrastructure spending also favored the market’s mood.
Moving on, gold’s further upside hinges on its break of the $1,835 monthly high, as it has already crossed the 200-DMA level of $1,821, before reaching the $1,845 hurdle.
End of the US session wrap.
After closing in the positive territory on Wednesday, gold preserved its bullish momentum and reached its highest level in two weeks at $1,832 before going into a consolidation phase. As of writing, the XAU/USD pair was up 1.35% on a daily basis at $1,831.
On Wednesday, the greenback came under strong bearish pressure after FOMC Chairman Jerome Powell adopted a patient tone regarding the beginning of asset tapering. Although Powell acknowledged that inflation was currently above desired levels, he reiterated that temporary factors were behind rising price pressures. Reflecting the broad-based USD weakness, the US Dollar Index (DXY) closed the third straight day in the negative territory.
During the first half of the day on Thursday, the USD struggled to find demand and the disappointing macroeconomic data releases caused the currency to continue to weaken in the American session.
The US Bureau of Economic Analysis announced that the US economy grew at an annualized rate of 6.5% (first estimate) in the second quarter. This reading followed the 6.4% expansion recorded in the first quarter and came in worse than the market expectation of 8.5%. Other data from the US revealed that there were 400,000 Initial Jobless Claims in the week ending July 24, compared to analysts' estimate of 380,000. Finally, the US National Association of Realtors reported that Pending Home Sales declined by 1.9% in June. Currently, the DXY is trading at its lowest level in a month at 91.90, losing 0.4% on the day.
On Friday, the Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred gauge of inflation, will be looked upon for fresh impetus. The Core PCE Price Index is expected to rise to 3.7% on a yearly basis from 3.4% in May. A stronger-than-expected reading could help the USD limit its losses but the Fed seems certain that inflation will come back down eventually and the market reaction is likely to remain short-lived.
Gold technical outlook
On the daily chart, the Relative Strength Index (RSI) indicator rose to 60 on Thursday, suggesting that the bullish momentum is still intact and there is more room on the upside before XAU/USD become technically overbought. Additionally, gold looks to close above the 200-day SMA for the first time since mid-June, confirming the bullish bias.
On the upside, the initial resistance is located at $1,834 (July 15 high) ahead of $1,845 (May 10 high) and $1,860 (Fibonacci 23.6% retracement of April-June uptrend).
Supports, on the other hand, are located at $1,830 (50-day SMA), $1,820 (200-day SMA) and $1,800 (psychological level, 100-day SMA and Fibonacci 50% retracement).
Additional levels to watch for
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.