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Gold price outlook captured by failure to test 50-day SMA


Gold price talking points

The price of gold appears to be stuck in a narrow range after the failed attempt to test the May low ($ 1,787), but a lack of momentum to test the 50-day SMA ($ 1,864) could undermining the recovery from the monthly low ($ 1,805). since the moving average reflects a negative slope.

Gold price outlook captured by failure to test 50-day SMA

Gold outperforms its precious metal counterparts as the price of copper drops to a fresh annual low ($ 3.72), and it remains to be seen whether gold will move to the beat of its own drum as it continues to make progress after the Federal Reserve interest rate decision.

Consequently, the price of gold may continue to follow the June series amid the continuing decline in U.S. treasury yields, and the threat of impending recession could encourage the Federal Open Market Committee (FOMC) to maintain the current rate for monetary policy. Chairman Jerome Powell warn that it will be “very challenging” to promote a soft landing for the USA economy.

Source: Atlanta Fed

In fact, the Atlanta Fed GDPNow model now shows that the forecast for “real GDP growth (seasonally adjusted annual rate) in the second quarter of 2022 is 0.0 percent”And signs of a slowing economy could force Fed officials to tame speculation for a 100bp rate hike amid the growing threat of a recession.

In turn, a further decline in U.S. yields could keep the price of gold standing ahead of the next FOMC interest rate decision on July 27, as the weakening outlook for growth limits the central bank’s room to implement a restrictive policy, and it wants to it appears that the committee will maintain the current approach in the normalization of monetary policy as chairman Powell and Co.strives to avoid adding uncertainty to what is already an extremely challenging and uncertain time. ”

With that said, the price of gold may continue to outperform its major peers as it exceeds the With low ($ 1787), but lack of momentum to test the 50-day SMA ($ 1864) could undermine the recovery of the monthly low ($ 1805) as the moving average reflects a negative slope.

Gold Price Daily Chart

Image of Gold Price Daily Chart

Source: Trading View

  • The price of gold seems to be on track to test the 50-Day SMA ($ 1,864) after failing to test the With low ($ 1787), but the precious metal appears to be stuck in a narrow range, as it has struggled to break / close above the $ 1859 (23.6% retracement) region.
  • Lack of momentum to test the moving average could undermine the recovery of the monthly low ($ 1805) as the indicator reflects a negative slope, with the Relative Strength Index (RSI) emphasizes a similar dynamic as it detects the upward trend transmitted from the previous month.
  • A close below the $ 1825 (23.6% expansion) to $ 1829 (38.2% retracement) brings the $ 1816 (61.8% expansion) area on the radar, with a shift below the monthly low ($ 1805) increasing the space for a test of the May low ($ 1787).

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

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