The XAU/USD (gold) edged up on Wednesday to trade above the key level $1,400 after Powell’s statement was interpreted by traders as dovish. The price of the yellow metal had dropped to trade at about $1,391 this week after positive NFPs on Friday last week.
Nonetheless, the XAU/USD (gold) continues to trade in a consolidative pattern following its surge in June. This could trigger a major reversal in the bullish trend.
XAU/USD (Gold) Fundamentals Overview
From a fundamental perspective, the XAU/USD (Gold) is trading at the back of several economic events stretching back to last week.
After the US Non-Farm Payrolls beat expectations of 160,000 with 224,000 jobs for June, Powell’s statement might appear to be putting things on hold for the greenback as depicted by the rebound in the price of gold on Wednesday.
The US generic treasury yields continued to fall in the latest update with the 2-Year down 8 basis points to 1.83% while the 10-Year yield fell to 2.05%. Powell also said that the Federal Reserve wants inflation to be symmetric at 2.0% adding that lower inflation will work its way in.
Looking forward, traders will be waiting on the FOMC minutes scheduled at around 18:00 GMT.
XAU/USD (Gold) Technical Analysis (the 60-min Chart)
From a technical viewpoint, the XAU/USD (Gold) appears to be forming a consolidative pattern since the turn of the month. This came after the formation of what looks like a double-top reversal pattern after a long bullish run in the preceding weeks.
This presents interesting trading opportunities for both the bulls and the bears. The bulls will target profits at around $1,423 while the bears will look to pounce by targeting profits at around $1,391.
XAU/USD (Gold) Technical Analysis (the Daily Chart)
The price of the yellow metal appears to be trading within a widening bullish wedge, which indicates a bullish bias in the market. It recently reached new multi-year highs but has since failed to rally further as the buyers move in to take profits.
In the long-term, the bulls will look to target profits at around $1,438 while the bears will hope for a major pullback by targeting profits at around $1,383. The Relative Strength Indicator shows that the bears might be more optimistic going into the next few weeks.
In summary, the price of gold has rebounded from weekly lows to edge above $1,400 ahead of the FOMC minutes and after Powell’s statement. However, the bears still retain control in the short-term.