Gold prices reached 5-month highs on Thursday as the U.S. dollar and Treasury bond yields strengthened. Recent positive economic data have increased expectations about continued rate hikes in the U.S.
The July Fed meeting minutes showed that the majority of officials still prioritize fighting inflation. At the same time, some members indicated the risks of excessive rate hikes to the economy.
As senior analyst at City Index Matt Simpson said, even with the negative impact of the FOMC minutes, there are signs of price stability in intraday trading. The dollar index is approaching its key high. In this case, the dynamics may soon change.
However, Reuters technical analyst Wang Tao does not support such an optimistic outlook. In his opinion, the precious metal price may fall to $1,879 per ounce after breaking through two key support levels.
Meanwhile, lower gold prices could increase investment interest from major market participants.
According to the World Gold Council (WGC), demand for the yellow metal in China will be mostly supported by financial investors and the central bank.
Investment demand for gold coins and bars is expected to be robust in the second half of the year, as Wang Lixin, executive director of WGC's China branch, stated. The regulator has been replenishing its inventories for 9 consecutive months, and in the first half of the year the central bank bought 103 tons.
The People’s Bank of China’s intention to diversify its assets is favorable for the yellow metal.
Gold has a distinctive bearish character. The price tested strong support at the level of 1,890, but failed to consolidate there.
The Relative Strength curve (standard values) has exited the oversold zone on the H4 timeframe, indicating the likelihood of the price growth.
Gold needs a technical pullback from the lows. The prices may rise due to closing short weekly positions.
The short-term outlook for XAUUSD suggests buying.
The target is at the level of 1,985.00.
Part of the profit should be taken near 1,947.00.
The Stop-loss is set at 1,890.00.
Bullish trend has a short-term character, so the trade volume should not be more than 2% of your balance.