Gold prices fall for the second day on Tuesday, hitting the lowest level in almost ten months as the greenback strengthens.
Spot gold, XAU/USD, dropped to $1,723 an ounce, its lowest level since September 2021, before recovering slightly. At the time of writing, the metal is trading around $1,730, 0.23% below its opening price.
Mounting concerns about an economic slowdown in major world economies and inflation pressures have raised red flags for investors who continue to fly to safety. The U.S. dollar continues to advance, even versus the precious metal, despite falling U.S. yields – reflecting higher demand for Treasuries.
On Wednesday, the U.S. will publish June's inflation figures, measured by the annual Consumer Price Index, which is expected to reach a new four-decade high of 8.8%. Core CPI is forecast to post a 5.8% increase, slightly below the 6% May rate.
Persistent inflation pressures have pushed the Fed to increase rates aggressively over the last months. Investors expect a 75 bps rate hike at the FOMC's next meeting, but Chair Powell has reiterated that higher increases – 100 bps – are not ruled out.
The XAU/USD holds a short-term negative bias from a technical standpoint, with the price posting lower lows below its main moving averages. At the same time, indicators remain in negative territory in the daily chart. However, the RSI shows oversold conditions, suggesting an upward correction or at least some consolidation before another leg lower.
On the upside, immediate resistance is seen at $1,760, followed by the more relevant $1,800 psychological level, reinforced by the 20-day SMA. On the other hand, a break below the $1,720 major support area would expose the $1,700 level en route to August 2021 lows at the $1,675 zone.