Title: Gold Prices Supported by Safe-Haven Buying, Volatility Expected Ahead of CPI Data
Date: August 9, 2023
Gold prices experienced a slight rebound during the Asian session today, currently trading at around $1931.42 per ounce. The market’s concerns about the global economic outlook, fueled by recent poor economic data from major countries, have led to increased safe-haven buying, providing support for gold prices. Moody’s rating agency also added to the safe-haven sentiment by lowering the ratings of several U.S. banks, with warnings of possible downgrades for larger banks.
On the other hand, expectations that the Federal Reserve will not raise interest rates this year have also contributed to the support for gold prices. The 10-year U.S. bond yield falling to a one-week low further bolstered this trend.
However, market attention is now focused on the upcoming U.S. consumer price index (CPI) data, set to be released on Thursday. Economists predict a slight increase in inflation for July, but attribute it mainly to the “base effect.” The year-on-year increase in CPI is expected to be 3.3%, while the year-on-year increase in core CPI may remain flat at 4.8%. The outcome of this data release may have a significant impact on gold prices.
In terms of technical analysis, the daily line level for gold prices indicates a fluctuating and falling trend, with short-term moving averages currently showing a bearish arrangement. The recovery of the 10-day moving average at $1941.75 is seen as crucial for the gold price outlook, as it currently faces further downside risks. Initial support is expected at the overnight low of $1922.65, followed by the support level of $1912.57 observed on July 10th. The lower rail support of the Bollinger Line stands at approximately $1908.92, with the key psychological support level of $1900.00 also acting as a crucial point. Furthermore, the 200-day moving average support is close to this level.
Despite the bearish sentiment, the KDJ indicator has issued a short-term overbought signal, suggesting that the support in the $1900-1920 range remains relatively strong. If the 10-day moving average can be recovered, it may weaken the short-term bearish signal. Moreover, a strong resistance level of $1967.64 exists, and a breakthrough could generate a bullish signal for the market outlook. In the short term, additional resistance is expected at the 5-day moving average of $1933.85.
In conclusion, gold prices are currently supported by safe-haven buying amid concerns about the global economic outlook and expectations of no interest rate hikes by the Federal Reserve. The upcoming U.S. CPI data will be closely watched for further market direction. While downside risks persist, potential short-term recoveries and bargain hunting opportunities should be approached cautiously.
Resistance levels: $1933.85, $1941.75, $1953.46, $1960.00, $1967.64
Support levels: $1922.65, $1912.57, $1908.92, $1900.00, $1892.85
Short-term operation suggestion: Adopt a wait-and-see approach, exercise caution with short-term rallies, and be mindful of short-term bargain hunting strategies.