Gold halted its descending momentum on Wednesday after ten consecutive days of sharp slide, closing with slight gains of 0.21 percent at 1245.47 points. Recent decline was mainly caused by Fed’s officials’ saying that the rate hike plan is still on the way, a hawkish voice pushing U.S. stocks while curbing Gold prices.
The gold gains significantly for a second straight day to 1252.12 points as of 11:20 a.m. in Sydney, showing a reversal near a daily support level found at the lower ascending channel line. Although it is rebounding mainly caused by a technical support, the mid-term outlook for Gold prices is not encouraging as the U.S. economic data is not delightful to long investors for gold.
Consumer prices in the United States increased 1.9 percent year-on-year in May of 2017, easing from a 2.2 percent rise in April and below expectations of 2 percent. It is the lowest inflation rate since November last year. Interest rate was announced to be revised up to 1.25 percent, 0.25 percent higher than previous, attracting more funds into bank sectors and securities, instead of into the gold market. From macroeconomic perspective, lower-than-expected inflation level and the proceeding rate hike plan are hampering its rally in a recent few weeks.
Technically the 4-hour chart shows a breakout of a key resistance level around $1249, which is very near the 50% Fibonacci retracement of the July-December 2016 major move, after the continued sell-off in Gold prices. A surge of the breakout move changes the short-term pessimism and may fuel massive confidence to investors who are looking for a long position. If it is not retreat to 50% retracement level, a higher resistance level could be identified at $1257.15.
Chat 1: XAUUSD H4
Given the bullish nature of the long-term setup, the Gold prices are rebounding after finding a support of the ascending channel line, and traders would likely want to incorporate the example of short-term support for making a long position. With price action did not move outside the long-term ascending channel, it more likely continues to swing in it.
Chart 2: XAUUSD Daily
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