Navigating the Gold Market: An In-depth Look at Recent Trends
The price of gold is continuing to drop, moving closer to the $1,900 mark. This is happening because the value of the US Dollar is starting to rise again. This increase is due to a careful approach in the market and a rise in US Treasury bond yields. Everyone is now waiting for the US Consumer Price Index (CPI) inflation data. This information will guide the US Federal Reserve's decisions about interest rates.
On Wednesday, the market is being cautious because of a drop in Apple and Oracle shares. People are thinking about what the European Central Bank and Bank of Japan might do next. They're also considering how the increase in oil prices could affect the world's economy and central banks. Oil prices are near their highest in ten months because OPEC+ has cut oil production.
The US Dollar is in demand because it's seen as a safe option when the market is uncertain. This is causing the price of gold to fall. US Treasury bond yields are going up again because people think that high US CPI data could lead to another increase in interest rates in November or December. There's a 93% chance that the Fed will not change interest rates in September. So, the price of gold could drop below $1,900.
The US CPI is expected to have increased by 3.6% in August, compared to 3.2% in July. The annual Core CPI inflation is likely to be 4.3%, down from 4.7% in July. On a monthly basis, the US CPI is expected to have increased by 0.6% in August, while the core figure is likely to remain at 0.2%.
On Tuesday, the price of gold fell. This happened because people expect the European Central Bank (ECB) to change its policy after seeing its inflation forecasts. This expectation made gold, which doesn?t earn interest, less attractive. The Euro became more popular because of the ECB report, which made the Euro to US Dollar exchange rate go up. This decrease in the value of the US Dollar helped stop the price of gold from falling too much, keeping it around $1,907.
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As we approach the release of US inflation data, the price of gold seems more likely to decrease. This is because it broke out of its previous range on Tuesday. Previously, the price of gold was fluctuating between the 21-day and 50-day moving averages (DMA), which were at $1,917 and $1,932 respectively. However, it ended the day below the 21-day DMA, indicating a potential downward trend.
The 14-day Relative Strength Index (RSI), which measures the speed and change of price movements, is currently below the midpoint and heading downward. This suggests that the price could continue to fall. The next important level for the price of gold is $1,900. If it falls below this level, we could see a rapid drop towards $1,885.
On the other hand, if the price starts to rise, it will first encounter resistance at the 21-day DMA of $1,917. If it can break through this level, it will then face the 200-day DMA at $1,921. If it can surpass this level, it could potentially rise to the 50-day DMA at $1,932.