Dollar Strength Stops Gold Gains

The US dollar receiving a positive wound from the Federal Reserve Bank of America’s real estate halted the path of gains in the price of gold XAU/USD this week. It extended the resistance level of $1947 per ounce to its highest level in three weeks and settles down after yesterday’s effect downwards around the level of $1925 per ounce at the time of writing the analysis. During today’s trading, Asian shares fell, tracking the decline in Wall Street indices after the Federal Reserve Bank said it may not cut US interest rates next year as much as it had previously thought. Accordingly, most of the regional markets declined by more than 1%. American futures and oil prices also fell.

Yesterday US stocks fell after the Federal Reserve Bank said it may not cut US interest rates next year as much as it previously thought, no matter how much Wall Street markets want it. The US Federal Reserve Bank kept the main interest rate constant at its highest level in more than two decades, as was expected. Officials also indicated they may raise the federal funds rate again this year as they try to lower US inflation to a 2% target. For his part, the head of the Federal Reserve Bank, Jerome Powell, said that he is close to reaching the peak of interest rates, if not already there.

In Asian trading, the Hang Seng Index in Hong Kong fell by 1.3% to 17662.78 points, and the Shanghai Composite Index fell by 0.5% to 3093.70 points. And Tokyo’s Nikkei 225 fell 1.1% to 32647.72, while Seoul’s Kospi fell 1.4% to 2524.80. And the Australian S&P/ASX 200 index fell by 1.2% to 7075.40 points.

At the same time, New Zealand’s main stock index rose by 0.1%. After the numbers released today Thursday by the New Zealand Statistics Authority indicated that the economy grew at an annual rate of 3.2% in the quarter from April to June. On a quarterly basis, the gross domestic product increased by 0.9%. Accordingly, Finance Minister Grant Robertson said that the economy is going through a difficult phase and will grow at twice the rate expected by economists.

As for the performance of the US stock indices on Wednesday on Wall Street, the S&P 500 index fell by 0.9% to 4402.20. And the Dow Jones Industrial Average fell by 0.2% to 34440.88 points, and the Nasdaq Composite Index fell by 1.5% to 13469.13 points. Federal Reserve officials have suggested they may cut US interest rates in 2024 by just half a percentage point from where they are expected to end this year. That’s less than the full percentage point of cuts they were expecting as of June. However, Powell stressed that expectations about where interest rates and other indicators are headed could change as more data emerges.

Where Powell said: “The prophets are humble, and they have much that calls for humility.”

• According to the performance on today’s chart below, the failure of the upward rebound attempt for the price of gold XAU/USD will support the formation of the head and shoulders.
• This gives the bears the opportunity to move in price towards stronger support levels, the closest of which are currently $1910 and $1889 respectively.
• I prefer buying from the last level, as I mentioned before, despite the performance of the US dollar, the gold market is receiving a strong blow from other factors, represented by global geopolitical tensions and fears of a global economic recession.

On the other hand, and in the same period of time, if the price of gold XAU/USD crosses the resistance of $1945 per ounce again, it will stimulate the bulls to move strongly towards upward levels that may reach the resistance of $1975 per ounce.

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