Gold Price Turns Positive Above $1730 Potential Reversal

(July 13th, 2022- Matias Salord)

• Gold Price follows wild moves in the Treasury market.
• US CPI rises above expectations in June, PPI data on Thursday. 
• Stocks decline but trim losses, caution tone prevails among market participants. 

Gold Price bounced sharply during the last hours and turned positive for the day. The metal bottomed at $1,706 following US inflation data and then rebounded, rising $40 in a few minutes. It peaked at $1,745, the highest level in three days. Volatility in prices is set to remain elevated on the back of market concerns and wild moves in the Treasury market.

Gold Price not out of the woods yet

Stocks in Wall Street are falling, but are off lows. In money markets, prices reflect inflation as the main concern for Federal Reserve officials in the short-term and a growth crisis later as the main issue. While in the short-term bets for more aggressive rate hikes are rising, prices reflect odds of rate cuts for 2023.

Inflation data triggers volatility

The US Labor Department reported Wednesday that the Consumer Price Index (CPI) rose 1.3% in June and 9.1% compared to the previous years, the fastest pace since late 1981. The Core CPI (which excludes food and energy) increased 5.9% YoY, below the 6% of the previous month. The figures were above expectations. The US dollar jumped after the report and then turned negative.

Gold Price initially reacted to a stronger US dollar and higher US yields, falling toward $1,700. When the price looked ready for a slide below to approach the 2021 bottom near $1,675, everything changed. The US 10-year yield fell from 3.07% to 2.90% and the 30-year rate from 3.22% to 3.08%. The US Dollar Index (DXY) hit a multi-year high at 108.58 and dropped to 107.50. The yellow metal bounced sharply, alleviating the bearish pressure.

Data to hold the key

Later on Wednesday, the Federal Reserve will release the Beige Book about the state of the economy. On Thursday, the Bureau of Labor Statistics will release the Producer Price Index for June. Another strong reading would contribute to raising expectations of a 100 basis point rate hike in July, currently above 60%. Such a scenario could be negative for Gold Price. The Labor Department will also release the Weekly Jobless Claims report. Positive news regarding the labor market or growth could be negative for the yellow metal.

Gold Price shows some not-so-negative signs

Gold Price rose back above $1,730 and also above the 20 Simple Moving Average in the four-hour chart, currently at $1,735. While above, XAUUSD could hold a positive momentum in the very short term. The key resistance ahead is $1,750. Above, gold could extend the recovery.

The spike to $1,706 followed by the rebound is a potential reversal that could anticipate further gains, particularly if it breaks above $1,750. A failure to do so could keep XAUUSD between $1,750 and $1,730.

Despite signs of some consolidation in the short-term, the main trend in Gold Price is bearish. A slide below $1,720 should expose again $1,700. Below the round number, there is not much support until the area of the 2021 lows of $1,650.