Gold Price Stalls Again at Former Support Zone

Gold Price Outlook

The price of gold may continue to retrace the decline from last month as it climbs to a fresh weekly high ($1935), but the recent rebound in bullion may unravel amid the failed attempts to close back above the former-support zone around the May low ($1932).

Gold Price Stalls Again at Former Support Zone

The opening range for July is in focus as the price of gold attempts to extend the advance from the start of the week, and the precious metal may attempt to test the 50-Day SMA ($1966) if it continues to register fresh weekly highs.

However, the rebound from the June Low ($1893) could be temporary as the moving average no longer reflects a positive slope, and data prints coming out of the US may produce headwinds for bullion as the Non-Farm Payrolls (NFP) report is anticipated to show another rise in employment.

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FOREX.com Economic Calendar

The NFP report is now anticipated to show the economy adding 225K jobs in June while the Unemployment Rate is seen narrowing to 3.6% from 3.7% the month prior, and persistent signs of a tight labor market may push the Federal Reserve to further combat inflation as the minutes from the June meeting reveal that ‘the staff saw the possibility of the economy continuing to grow slowly and avoiding a downturn as almost as likely as the mild‑recession baseline.’

The transcript suggests the Federal Open Market Committee (FOMC) will retain a hawkish forward guidance as ‘the staff saw the risks around the baseline inflation forecast as tilted to the upside, as economic scenarios with higher inflation appeared more likely than scenarios with lower inflation,’ and growing speculation for a rate hike in July may drag on the price of gold as Chairman Jerome Powell and Co. project a steeper path for US interest rates.  

With that said, data prints coming out of the US may sway gold prices as the FOMC keeps the door open to pursue a more restrictive policy, and the recent rebound in bullion may unravel amid the failed attempts to close back above the former-support zone around the May low ($1932).

Gold Price Chart – XAU/USD Daily

Chart Prepared by David Song, Strategist; Gold Price on TradingView

• The price of gold extends the rebound from the June Low ($1893) to register a fresh weekly high ($1935), and the precious metal may attempt to test the 50-Day SMA ($1966) amid the failed attempt to break/close below the $1886 (23.6% Fibonacci extension) to $1897 (61.8% Fibonacci retracement) region.
• However, the former-support zone around $1928 (23.6% Fibonacci retracement) to $1937 (38.2% Fibonacci extension), which incorporates the May low ($1932), may now act as resistance as the moving average no longer reflects a positive slope.
• The price of gold may face range bound conditions as long as it holds above the June Low ($1893), but a break/close below the $1886 (23.6% Fibonacci extension) to $1897 (61.8% Fibonacci retracement) region may push bullion towards $1859 (23.6% Fibonacci retracement), with the next area of interest coming in around $1837 (38.2% Fibonacci retracement) to $1843 (50% Fibonacci retracement).

Additional Resources:

EUR/USD Outlook: Pay Attention to July Opening Range

USD/JPY Forecast: Overbought RSI Reading Persists

--- Written by David Song, Strategist

Follow on Twitter at @DavidJSong