Gold Price Forecast: XAU/USD maintains the bearish stance despite growing optimism

XAU/USD Current price: $1,920.25

• The United States Consumer Price Index printed at 3.2% YoY in July, below expected.
• Financial markets are pricing in no more rate hikes from the Federal Reserve this year.
• XAU/USD keeps posting lower lows on a daily basis, anticipating a potential slide through $1,900.

Gold prices remain under selling pressure on Wednesday, trading around $1,920 after peaking for the day at $1,930.09 following the release of the United States (US) Consumer Price Index. XAU/USD advanced throughout the first half of the day, as news that China further loosened travel restrictions boosted the mood, while speculative interest stood away from the US Dollar in anticipation of the inflation update.

Finally, the data came out, spurring risk appetite. According to the US Bureau of Labor Statistics (BLS), inflation rose 0.2% MoM in July, in line with the market forecast, while advancing 3.2% from a year earlier, slightly below the 3.3% expected, although higher than the previous 3%. Additionally, the core annual reading printed at 4.7%, declining from 4.8% in June. The figures boosted the case for a long-lasting pause in Federal Reserve’s monetary tightening, sending the US Dollar down against most major rivals.

Former US Dollar strength came to play after the dust settled, with major rivals trimming their CPI-inspired gains. Also, optimism receded following comments from Federal Reserve Bank of San Francisco President Mary Daly, who said she supports not prematurely projecting Fed moves, repeating the well-known message that rate movements are data-dependant. Finally, she noted that CPI data came in “largely as expected” and that it does not say victory on inflation.

XAU/USD price short-term technical outlook

The daily chart for the XAU/USD pair shows it holds to modest gains, while at the same time, the pair continues to post lower highs and lower lows, with the risk still skewed to the downside. At the same time, Gold remains below a bearish 20 Simple Moving Average (SMA), which gains downward traction below a flat 100 SMA. The 200 SMA, on the other hand, aims higher below the $1,900 level, limiting the downside from the broader perspective. Finally, technical indicators remain within negative levels with modest upward slopes, way short of confirming an interim bottom.

In the near term, and according to the 4-hour chart, bears retain the lead. XAU/USD briefly traded above a bearish 20 SMA but remains well below it, while the longer moving averages gain bearish traction above the shorter one. At the same time, technical indicators have turned lower within negative levels, anticipating another leg south, with a potential break through the $1,900 threshold.

Support levels: 1,911.80 1,898.10 1,888.30

Resistance levels: 1,934.85 1,944.95 1,955.60

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