Gold Price bounces off yearly low above $1,700 ahead of US inflation

• Gold Price portrays a corrective pullback from yearly low.
• White House optimism joins softer US data and mixed updates on China covid to favor XAUUSD recovery.
• US CPI for June will be crucial amid fears of Fed’s aggression, recession.

Gold Price (XAUUSD) picks up bids to consolidate recent losses around the lowest levels since September 2021, up 0.08% intraday near $1,727on Wednesday. The metal’s near-term technical outlook suggests a corrective pullback in prices. However, fundamentals are against the gold buyers amid fears of recession and chatters surrounding the Fed’s aggressive rate hikes.

Gold Price portrays market’s indecision

Market sentiment remains mixed, after witnessing a cautious optimism the previous day. While portraying the mood, the US Dollar Index (DXY) regains upside momentum amid fears of recession/inflation. However, the mildly bid S&P 500 Futures and the recovery in the US Treasury yields, up by 2.7 basis points (bps) to 2.985% at the latest, also hints at the improvement in risk appetite. Hence, a lack of clear directions confuses traders and the same could be witnessed in the latest Gold Price moves.

Also read: Gold Price Forecast: XAUUSD hangs by a thread above $1,700.00

White House statement, mixed data favor XAUUSD rebound

Gold bars

The White House (WH) Memo appeared to have challenged the market bears of late. . “The US economic data, including the June jobs report, are not consistent with a recession in the first or second quarters,” the White House said in a memo released on Tuesday, as reported by Reuters.

On the same line was the US NFIB Business Optimism Index for June and Eurozone/German ZEW Survey data for July. The US business sentiment gauge dropped to the lowest since early 2013 while flashing 89.5 figures versus 93.1 prior. Additionally, ZEW Survey data for July showed that German Economic Sentiment slumped to -53.8 while missing estimates of -38.3. Its counterpart for Eurozone also dropped to -51.1 versus the -28.0 previous reading and -32.8 expected. Further, Germany’s ZEW Survey Current Situation sub-index arrived at -45.8 in July compared to -34.5 expectations.  

IMF probes optimists

The latest economic projections from the International Monetary Fund (IMF) appear to have renewed fears of a slowdown, even if it fails to probe gold buyers. That said, the IMF cuts US 2022 GDP growth projection to 2.3% from 2.9% in late June, due to revised US data. “The Fund included the new forecasts in the full report of its annual assessment of the U.S. economy, which highlighted the challenges of high inflation and the steep Federal Reserve interest rate hikes needed to control prices,” said Reuters.

Coronavirus conditions in China

Covid updates from China flash mixed signals for the Gold Price. The reason could be linked to the virus variant’s faster spread in Shanghai and the recently announced lockdown in Wugang city of Henan Province. With the latest economic unlock not being too far, fresh activity restrictions could recall the market fears of economic slowdown and favor the pair bears. It should, however, be noted that the latest jump in Shanghai’s covid numbers was inside the quarantine area and challenges the pessimism, which in turn favors XAUUSD buyers.

US CPI is the key

US Consumer Price Index (CPI) numbers for June will be crucial for the Gold Price amid the hawkish bets on the Fed. Forecasts suggest the US CPI rise to 8.8% YoY from 8.6%, which in turn could increase the odds of a faster Fed rate hike and weigh on the Gold Price. However, any negative surprise could help XAUUSD to extend the latest corrective pullback from the yearly low.

Gold Price technical outlook

Gold Price rebounds from a horizontal area established since April 2021 while recently refreshing the intraday high. XAUUSD rebound also takes clues from the oversold RSI conditions.

However, recovery needs to cross the December 2021 low surrounding $1,755 to convince the gold buyers. Even so, the 61.8% Fibonacci retracement of March 2021-22 upside, near $1,828, could challenge the metal’s further upside.

Meanwhile, a downside break of the aforementioned horizontal support area surrounding $1,720-25, could direct Gold Price towards an upward sloping support line from March 2021, at $1,708 by the press time.

In a case where the quote drop below $1,708, the $1,700 threshold may test the bears before directing them to the 2021 bottom surrounding $1,676.

Gold Price remains bearish near term