Gold Price Forecast: Dead cat bounce or interim bottom?
XAUUSD Current price: $1,748.38
- Dismal US data provide an opportunity to take some profits out of the table.
- Global stock markets remain under pressure as recession fears remain the same.
- XAUUSD bounced from a critical support level, but further gains are unclear.
Gold trades at around $1,750 a troy ounce, up for the day after the dollar changed course early in the American session. XAUUSD traded as low as $1,739,78 as the greenback preserved its momentum throughout the first half of the day. The catalyst for the USD slide came from S&P Global, as the company published the flash estimates of the US August PMIs.
Services activity contracted sharply, with the index plunging to 44.1, while the Manufacturing PMI expanded at a slower-than-anticipated pace, with the index down to 51.3 from 52.2 in July. Finally, the Composite PMI declined to 45, an over two-year low. The market used the discouraging news to take some profits out of the table, but the risk-averse sentiment persists.
Asian and European indexes closed in the red, reflecting investors’ concerns, while Wall Street struggles to revert pre-opening losses. Odds for a September 75 bps rate hike are once again above 50%, weighing on high-yielding equities.
Gold price short-term technical outlook
Spot gold trimmed Monday’s losses and is marginally higher on a weekly basis. The daily chart shows that it posted a higher low and a higher high after meeting buyers around the 61.8% retracement of its latest daily advance at $1,729.30, hinting at a potential bullish continuation. Technical indicators in the mentioned time frame have pared their slides and turned marginally higher but are still developing below their midlines. At the same time, the price remains below all of its moving averages, which somehow limits the bullish potential.
The 4-hour chart shows that technical indicators corrected extreme oversold conditions but pared their recovering below their midlines, losing upward strength. Meanwhile, the price is hovering around a bearish 20 SMA, which keeps heading south below the 200 SMA. Overall, the risk remains skewed to the downside, with higher chances of a recovery on a break above $1,759.10, the 38.2% retracement of the aforementioned daily advance.
Support levels: 1,729.30 1,718.40 1,705.90
Resistance levels: 1,759.10 1,772.40 1,783.10
Author
Valeria Bednarik
FXStreet
Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.
