Fundamental analysis of XAU/USD
Gold is trading in a mixed trading environment: it recently fell to a three-week low amid a strengthening US dollar and expectations for a key US inflation indicator.
Traders are focusing on the Consumer Price Index (CPI) data to forecast the Federal Reserve's interest rate change. A strengthening U.S. dollar and continued inflation expectations have made gold less attractive, especially for investors holding other currencies. Recent hawkish comments from Fed officials indicating support for a rate hike if current economic conditions persist have put additional downward pressure on gold prices. Strength in the U.S. labor market, as evidenced by the employment and JOLTS reports, points to a hawkish stance by the Fed, which could lead to further downward pressure on gold prices if the trend continues.
Bond yields rose to their highest level since November 2008, making zero coupon assets such as gold less attractive. Lower 10-year Treasury yields and a slowdown in the U.S. service sector could signal looser monetary policy, which would make gold more attractive. A weakening dollar, which recently hit a six-week low, is also boosting gold's appeal. In addition, the tense situation in the Middle East has increased demand for gold as a "safe haven".
An escalation of conflict seems unlikely in the near future, which could lead to a period of stable gold prices. The main event on Tuesday will be the US consumer price index. These events could provide a clear direction for gold prices.
Technical analysis and scenarios:
Alligator is hungry: its mouth is wide open, its jaw (blue line) is high above the lips and teeth (green and red lines), the instrument is in a downtrend. Awesome Oscillator (AO) and Accelerator Oscillator (AC) are in the gray zone showing divergence, which is not a reliable signal to open a position.
Main scenario (SELL)
Recommended entry level: 1930.00.
Take Profit: 1925.00.
Stop Loss: 1932.50.
Alternative scenario (BUY)
Recommended entry level: 1945.00.
Take Profit: 1950.00.
Stop loss: 1942.50.00.