Gold Price Forecast: XAU/USD flirts with weekly lows, aims for $3,300

XAU/USD Current price: $3,336.86

• An unexpected jump in the US Producer Price Index in July spurred risk aversion.
• A souring market mood boosted demand for the US Dollar, weighing on Gold price.
• XAU/USD pressures its weekly low, could extend its slide towards $3,300.

Spot Gold pressures a fresh weekly low around the $3,330 level in the American session on Thursday, amid resurgent US Dollar (USD) demand. Financial markets were shocked by recent United States (US) inflation-related figures, as, following the release of a benign July Consumer Price Index (CPI) earlier in the week, the Producer Price Index (PPI) in the same period was much hotter than anticipated.

Inflation at wholesale levels in the US surged at an annualised pace of 3.3% in July according to the PPI, while the core annual reading printed at 3.7%, much higher than the 2.6% posted in June or the expected 2.9%. The figures weighed down hopes for an interest rate cut in September, but a rate cut remains on the table. According to the FedWatch Tool, a rate cut of 25 basis points (bps) is 90.4% possible in September, compared to the 94.3% from before the PPI release.

Wall Street turned south with the news, with the three major indexes trading in the red at the time. At the same time, demand for the USD returns, resulting in a modest XAU/USD retracement despite the softer mood.

Friday will bring the US July Retail Sales and the preliminary estimate of the August Michigan Consumer Sentiment Index.

XAU/USD short-term technical outlook

The daily chart for the XAU/USD pair shows that it has been trading within a limited intraday range, just below a flat 20 Simple Moving Average (SMA), providing dynamic resistance at around $3,357. The same chart shows the 100 SMA keeps grinding north, albeit losing its upward momentum at around $3,301.80. Finally, technical indicators remain within neutral levels, with the Relative Strength Index (RSI) indicator turning marginally lower, in line with the ongoing weakness.

In the near-term, and according to the 4-hour chart, the risk skews to the downside. The XAU/USD pair develops below all its moving averages, with the 20 SMA gaining downward traction between directionless 100 and 200 SMAs. At the same time, technical indicators turned flat, although within negative levels, reflecting the latest bounce but far from suggesting additional recoveries.

Support levels: 3,328.10 3,312.25 3,301.80

Resistance levels: 3,350.00 3,372.30 3,389.85