Gold Price Forecast: XAU/USD flirts with $1,960 amid broad USD sell-off

XAU/USD Current price: $1,958.53

• United States Consumer Price Index rose by 0.2% MoM in June and 3% YoY.
• Stocks rallied on encouraging US news, while the US Dollar plunged amid hopes the US will avoid a recession.
• XAU/USD bullish momentum set to continue in the near term, but risk appetite will cap rallies.

XAU/USD Movement

XAU/USD rallied on Wednesday, reaching an intraday high of $1,959.30 a troy ounce early in the American session, as the US Dollar collapsed following lower-than-anticipated inflation figures. The Consumer Price Index (CPI) increased 0.2%  MoM in June, below the 0.3% anticipated. In the same period, the CPI was up by 3% YoY, while the core annual reading printed at 4.8%,  both missing forecasts and indicating price pressures continued to ease.

The figures spurred risk appetite, with global stocks rallying and the US Dollar falling across the FX board. After the dust settled, Wall Street loses momentum but retains gains, while the Greenback consolidates losses near fresh multi-week lows.

Inflation situation

Lower inflation means the Federal Reserve (Fed) could ease or even end the tightening cycle, which also means the United States could avoid a recession or suffer from a lighter-than-anticipated one. United States (US) policymakers had clearly indicated that future monetary policy decisions would be data-dependant while anticipating at least two more 25 basis points (bps) rate hikes.

XAU/USD price short-term technical outlook

XAU/USD trades at its highest in almost a month, and the daily chart shows that bulls regained control of the bright metal. Gold currently develops above a mildly bullish 100 Simple Moving Average (SMA), which stands at $1,950.70. At the same time, technical indicators have extended their firmly bullish slopes well into positive territory, hinting at additional gains ahead. Finally, the 20 SMA remains directionless below the intraday low of $1,932.13,  so far unable to confirm sustained gains in the term.

In the near term, and according to the 4-hour chart, the bright metal is extremely overbought, but given that it pressures the intraday high, XAU/USD could add further ground before finally correcting some. Technical indicators consolidate at extreme levels, while the 20 SMA gains upward traction above the 100 SMA, although below a directionless 200 SMA. Overall, it seems the bright metal could extend near-term gains, yet continued risk appetite will limit the advance.

• Support levels: 1,950.70 1,940.95 1,928.60
• Resistance levels: 1,967.90 1,983.40 1,996.55

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