Fundamental analysis of XAU/USD
Gold prices, represented by the XAU/USD pair, were steady on Tuesday, helped by a weaker dollar and lower bond yields. The dollar weakened to its lowest level in two months on the prospect of low interest rates, making gold a better proposition for holders of other currencies. Investors are adjusting to expectations that the Fed's rate hike cycle, which has largely fueled the fall in the gold price, is coming to an end. Despite supportive factors such as a weak dollar and low yields, gold enthusiasts are in no rush to fully invest ahead of Wednesday's release of the U.S. inflation report.
Data from the U.S. Department of Labor's latest employment report showed that the U.S. economy created the fewest jobs in more than two years in June, but strong wage growth indicates a stable labor market. The focus is now on US Consumer Price Index (CPI) data due for release on Wednesday. As inflation expectations are slowing, an unexpected rise could cause significant volatility and put pressure on gold prices. Overall, gold markets stabilized amid a weaker US dollar as investors were wary of the US inflation data coming out. The focus is now on the upcoming CPI data, which is expected to show a slight increase in the core CPI in June.
Hawkish comments from the Fed and rising tensions between the US and China have made gold buyers nervous ahead of Wednesday's US inflation data. Another factor causing investors to take a pause is the growing uncertainty surrounding US Treasury bond yields. In particular, market fears of a possible recession are causing traders to turn to traditional safe haven assets such as bonds, gold and the yen. Recently, however, it is these factors that have been supporting the US dollar due to risk aversion, which is no longer true. As a result, market fears are driving investors to buy more expensive gold, but there are potential limits to further gains.
Technical analysis and scenarios:
The XAU/USD pair is currently trading at the price level of 1932.50, showing a positive trend according to the Alligator indicator. The Alligator jaw is wide open with the jaw (blue line) below the teeth and lips (green and red lines), indicating an uptrend. The Awesome Oscillator (AO) and Accelerator Oscillator (AC) are in the green zone, hovering near the zero level. This indicates a strong confirmation of the current bullish sentiment.
Main scenario (BUY)
Recommended entry level: 1953.00.
Take Profit: 1980.00.
Stop loss: 1932.00.
Alternative scenario (SELL)
Recommended entry level: 1915.00.
Take Profit: 1893.00.
Stop loss: 1925.00.