Fundamental analysis of XAU/USD

Gold prices rose on Tuesday, with the U.S. dollar pulling back from a two-week high, boosting investors' ability to buy the precious metal. After a recent four-day decline, gold is trading at 1960.00. The change appeared to be a reaction to market sentiment fueled by news of China's stimulus package and central bank intervention. However, concerns over past PMIs and central bank activity seem to be weighing on gold prices.

The financial market is still awaiting the outcome of the Federal Open Market Committee (FOMC) meeting, which will lead to changes in the economy. All eyes will be on the speeches of Fed Chair Jerome Powell and ECB Chair Christine Lagarde, which will determine the direction of monetary policy and influence the direction of gold prices.

According to the latest data, the pace of market growth in the U.S. and Europe slowed in July, indicating a possible suspension of interest rate hikes by central banks. Market participants expect the Fed to keep interest rates at 5.25-5.5% by the end of 2024. The S&P 500 index futures contract failed to extend the previous session's gains, hovering around 4,550, while yields on 10-year and 2-year U.S. Treasuries fell to 4.88%.

China's largest state-owned enterprises are boosting their profits by selling dollars and buying yuan in domestic and international markets. The move is in line with the country's desire to provide policy support for its economy.

Traders should keep an eye on gold as the market continues to focus on monetary policy. The markets' main focus will be on the Fed and ECB monetary policy meetings and future policy recommendations.

Technical Analysis and Scenarios:

Gold is currently trading at $1960.00, sitting between key support levels of $1952.00, $1945.00 and $1938.00 and resistance levels of $1985.00, $1978.00 and $1970.00. As the Bollinger Bands show an upper boundary at $1979.50, a middle band at $1965.50 and a lower band at $1951.40, and their direction is downward, there seems to be a narrowing of the price range with price rising in the lower range of the indicator.

Main scenario (BUY)

Recommended entry level: 1970.00.

Take Profit: 1978.00.

Stop loss: 1967.00.

Alternative scenario (SELL)

Recommended entry level: 1952.00.

Take Profit: 1945.00.

Stop loss: 1955.00.