Gold price has shown upward momentum on Friday, recording a slight increase, yet it lacks strong follow-through buying. The XAU/USD pair finds support from more subdued risk sentiment and reduced demand for the US Dollar. However, traders exercise caution and refrain from making aggressive bets due to the upcoming central bank events scheduled for the following week. Currently trading just below $1,975, XAU/USD is up more than 0.15% for the day, but traders are mindful of the fundamental backdrop before considering further bullish moves.
The resurgence of safe-haven demand has played a significant role in supporting Gold prices. With a generally softer tone in the equity markets, concerns about China's economic growth slowdown, escalating US-China trade tensions, and geopolitical risks, investors are seeking refuge in the precious metal. Additionally, the US Dollar's subdued performance adds to Gold's appeal. Traders are uncertain about the Federal Reserve's future rate-hike path, resulting in the USD Index consolidating gains at over a one-week high.
The uncertainty surrounding the Federal Reserve's rate-hike trajectory is capping XAU/USD's potential gains. Market participants have already factored in the expected 25 basis points lift-off at the upcoming Federal Open Market Committee (FOMC) meeting on July 25-26. However, optimistic Initial Jobless Claims data from the US on Thursday signals a tight labor market, bolstering the case for further policy tightening by the Fed. This creates uncertainty about whether the Fed will adopt a more dovish policy stance or stick to its previous forecast of a 50 bps rate hike by year-end.
Forex and crypto traders are closely monitoring next week's key central bank meetings, starting with the highly-anticipated FOMC policy decision on Wednesday. Following that, the European Central Bank (ECB) meeting on Thursday and the Bank of Japan (BoJ) monetary policy update on Friday will also be crucial events. Given the looming central bank event risks, traders may remain cautious and avoid aggressive directional bets, preferring to stay on the sidelines. Consequently, Gold price could experience subdued price action on Friday, particularly in the absence of significant market-moving economic data from the US.
Despite the current caution, Gold price remains on track to register gains for the third consecutive week. The recent breakout above multiple resistance levels favors bullish traders, and any significant corrective declines may be viewed as buying opportunities, likely to be limited, for the time being. From a technical standpoint, XAU/USD faces resistance around the $1,980 area, followed by the overnight swing high between $1,987 and $1,988. A sustained upward movement could propel Gold's price beyond the psychological $2,000 mark, aiming to test the next significant resistance at $2,010-$2,012. Conversely, immediate support levels are at $1,965, and the 100-day Simple Moving Average (SMA) is around $1,960. A breach of these levels could trigger further declines, with potential support seen around $1,946-$1,945 and $1,934. Nonetheless, any subsequent fall is likely to attract fresh buyers, keeping the downside contained near $1,926-$1,925.