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The gold rally has weakened, and there is uncertainty about how much further the XAU/USD could fallNewsDaily technical analysisThe gold rally has weakened, and there is uncertainty about how much further the XAU/USD could fall

The gold rally has weakened, and there is uncertainty about how much further the XAU/USD could fall

The decline of gold below a significant level of support on Thursday indicates that the upward trend observed over several weeks has declined. This is due to the increasing use of hawkish language by central banks and a general improvement in broader risk sentiment, which reduces the appeal of gold as a safe-haven asset.

The XAU/USD has recently experienced a drop below its support level of 1930 after maintaining this position for several weeks. This decline includes breaching the end-May low, the 89-day moving average, and the lower boundary of the Ichimoku cloud.

XAU/USD 240-minute Chart

XAU/USD 240-minute Chart

The recent price action has given rise to two potential price targets. A minor descending triangle has been initiated on the hourly chart by the break below a horizontal trendline from the end of May, and its price objective is approximately 1890.

In terms of daily charts, the rebound observed at the start of this month was found to be weak, as it only retraced 38.2% of the decline that occurred in May. Upon analyzing the price objective measurements taken during the May downswing, it has been forecasted that there will be a decrease towards the 200-day moving average, which currently stands at approximately 1852.

XAU/USD Daily Chart

During a hearing before the Senate Banking Committee, Powell reaffirmed the Federal Reserve’s hawkish position and suggested that additional increases in interest rates might be necessary. He emphasized that any changes in interest rates would proceed with caution at a measured pace. Powell further stated that the Federal Reserve is nearing its desired economic targets, indicating potential stability in the near future.

XAU/USD Daily Chart

Powell elaborated on the June decision to maintain interest rates by explaining that its purpose was to decelerate the pace of the Fed’s increase in borrowing costs. Fed Governor Michelle Bowman also expressed the need for additional rate hikes, hinting at a minimum of two more. In addition, the Bank of England’s recent decision to unexpectedly raise interest rates by 50 basis points instead of the anticipated 25 suggests that central banks worldwide are still combating inflation.

XAU/USD Daily Chart

The intraday charts indicate a sustained downward trend, as evidenced by the colour-coded 240-minute candlestick charts. Significantly, XAU/USD has breached the Ichimoku cloud cover on the daily chart and the 89-day moving average for the first time since late 2022. This development is further substantiated by a decline below an uptrend line from November, which confirms a temporary easing of upward pressure.

Note: The above colour-coded chart(s) is(are) based on trending/momentum indicators to minimize subjective biases in trend identification. It is an attempt to segregate bullish Vs bearish phases, and consolidation within a trend Vs reversal of a trend. Blue candles represent a Bullish phase. Red candles represent a Bearish phase. Grey candles serve as Consolidation phases (within a Bullish or a Bearish phase), but sometimes they tend to form at the end of a trend. Candle colors are not predictive – they merely state what the current trend is. Indeed, the candle color can change in the next bar. False patterns can occur around the 200-period moving average, or around a support/resistance and/or in sideways/choppy market. The author does not guarantee the accuracy of the information. Past performance is not indicative of future performance. Users of the information do so at their own risk.

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