XAU/USD Analysis: Gold Price Falls from Six-Week High

FXOpen -

As shown by the XAU/USD chart, on Friday, 5 July, the price of gold rose above the $2390 level for the first time since 22 May. According to Reuters, this increase occurred following the release of key US employment data, which indicated a softening labour market, raising expectations of a Federal Reserve interest rate cut in September.

However, yesterday, Monday, the gold price fell to $2360 per ounce – the level from which Friday's ascent began. This suggests that the bulls were unable to maintain control over the market, which indicates a bearish sign.

Could the Gold Price Decline in the Coming Days?

From a technical analysis perspective of the XAU/USD chart:

  • The gold market has clear support around the $2300 area. Each time the price fell below this level in June (as indicated by arrows), it quickly rebounded upwards, demonstrating sustained demand.
  • Price action since April provides enough reference points to establish a descending channel (shown in red). The recent bearish reversal returned the price within this channel, reinforcing resistance from its upper boundary.
  • There is also reason to believe that the bullish breakout of local resistance (shown in black) might be false.

Therefore, signs of seller activity in the $2380-2400 range suggest that the gold price could continue to decline towards the important support at $2300.

External Influences on the Gold Market

The head of the Federal Reserve, Jerome Powell, is likely to have a significant impact on the gold market. Powell will testify before Congress, starting with an appearance in the Senate on Tuesday at 17:00 GMT+3, followed by the House of Representatives on Wednesday at 17:00 GMT+3.

If Powell hints directly or indirectly at signs of weakness in the US economy, this could provide a positive impulse for the gold price. In such a scenario, expectations of an imminent rate cut may increase (currently, according to CME’s FedWatch Tool, the probability of a September rate cut is estimated at 77%). The attractiveness of non-yielding gold bars typically rises in a low-interest-rate environment.