Another set of upbeat US economic data published on Thursday, especially the improving US Q2 GDP growth numbers fuelled the recent chatter around Sept Fed rate-hike further which dragged on the gold prices in terms of the US dollar (XAU/USD) sharply lower. XAU/USD witnessed an inverted pennant breakout yesterday and printed lows at 1082.53, dropping nearly $ 16 from 1098.70 highs. The pair reversed previous gains and resumed its downtrend following Wednesday’s FOMC outcome which revealed that Fed still remains on track to raise rates this year.
A for today’s trade so far, XAU/USD keeps falling and now trades near daily lows of 1081.12, heading towards five year lows reached at 1076.77 on July 24. The USD bulls keep total control in the European session, reversing a brief correction seen in Asia, as yesterday’s positive US data confirmed the recent signs of strength seen in the US economic recovery, supporting Fed’s stance of data-dependent mode towards rate-hike.
On Thursday, the first estimate of US GDP for the second quarter improved from 0.6% to 2.3% and confirmed the solid growth of the US economy after the anaemic result in Q1. While Fed’s closely watched, the Personal Consumption Expenditure (PCE) index increased to 2.9% on a quarterly basis, beating the expectation of 2.7%, and increasing from a revised 1.8% seen during the first quarter of 2015.
Technically, on daily charts, the recent inverted/ bear pennant breakout has confirmed further bearish bias in in XAU/USD. However, only a breach of 1080 – key support and subsequently new five-year lows of 1076.77 levels will trigger fresh sell-off in the yellow metal opening floors for a test of 1070-1065 – early 2010 levels. Below which 1040 – crucial levels comes in to picture. In case the pair resists the five-year low, we could see a minor recovery towards 1088-1090 levels beyond which the pair could once again try to reclaim 1100 barrier.
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