- Risk-off action in global stocks boosts the dollar’s haven demand.
- Coronavirus fears and US-China woes cushion gold’s downside.
- Bearish bias to persist ahead of the US CPI, COVID-19 stats.
Gold (XAU/USD) closed below $1800 mark for the second straight day on Monday following a wild ride witnessed in the US last session. The bright metal fell under the latter from as high as $1813 levels after the US dollar bounced-back across the board amid a flight to safety. The US stocks were sold-off into the growing coronavirus risks after California reimposed on businesses and public spaces amid a spike of coronavirus infections. Further, souring diplomatic US-China ties over the Hong Kong and South China sea issues also weighed on the risk appetite and boosted the haven demand for the US currency. This, in turn, made the USD-denominated gold expensive in other currencies.
Gold is likely to remain pressured in the day ahead, as the greenback will continue to benefit from broad risk aversion. The focus shifts towards the critical US Consumer Price Index (CPI) release, due later today at 1230 GMT. The US CPI is seen higher at 0.6% in June YoY vs. 0.1% last while the core figure is seen a tad lower at 1.1% last month. The monthly rate is expected to rebound 0.5% in June while the core inflation is seen at +0.1%. Any disappointment in the US inflation numbers combined with fresh COVID-19 stats could help cushion the downside in gold. All eyes will also remain on the US corporate earnings for fresh cues on the global market sentiment.
Short-term technical outlook
Gold: Four-hour chart
On the four-hour chart, the sentiment has turned bearish for the bright metal, after the price slipped back below the 21-4H Simple Moving Average (SMA) at $1803.87 while trading within a symmetrical triangle formation. The 4H Relative Strength Index (RSI) has pierced through the midline from above, backing the near-term downside bias.
The immediate support is seen at the rising trendline support at $1795.13, below which the pattern will get validated. The next support is aligned at the upward sloping 50-4H SMA at $1792.15.
Acceptance below the latter will open floors towards the 100-4H SMA support at $1779.50. The pattern target is seen at $1769, which will be on the sellers’ radars in the coming days.
Alternatively, only a break above the aforesaid 21-4H SMA support-turned-resistance will revive the recent bullish momentum, which could see the bulls test the falling trendline resistance near $1813. That level coincides with Monday’s high.
Gold: Additional levels to consider
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