Reviving safe-haven demand further benefits XAU/USD
Apart from this, concerns over a global economic slowdown, the worsening US-China ties and geopolitical tensions lend additional support to the safe-haven Gold price. China’s ambassador to Washington said on Wednesday that China does not want a trade or tech war but will respond if the US imposes more curbs on imports of equipment to make advanced chips. Adding to this, Russia’s defence ministry declared that any ships heading to Ukraine’s Black Sea ports would be viewed as potential carriers of military cargo and party to the conflict from Thursday. This, in turn, keeps a lid on the recent optimistic move in the equity markets and drives some haven flows towards the precious metal.
Fundamental backdrop seems tilted in favour of bullish traders
Apart from this, expectations that the European Central Bank (ECB) could signal a win against inflation and pause its rate-hiking cycle further seem to benefit the non-yielding Gold price. In fact, a slew of ECB Governing Council members this week reinforced the view that inflation may drop more quickly than forecasted and raised uncertainty over additional rate hikes beyond the July meeting. Moreover, inflation in Canada dropped to within the Bank of Canada’s (BoC) control range for the first time since March 2021. This, in turn, suggests that the path of least resistance for the XAU/USD remains to the upside, though bulls might wait for some follow-through buying beyond the weekly high before placing fresh bets.
Gold price technical outlook
From a technical perspective, the overnight bounce from the $1,970 horizontal resistance breakout and the subsequent move beyond the $1,984-$1,985 region will validate the positive outlook. Given that oscillators on the daily chart are holding in the bullish territory, the Gold price seems poised to aim back to reclaim the $2,000 psychological mark. The upward trajectory could get extended further towards testing the next relevant hurdle near the $2,010-$2,012 supply zone.
On the flip side, the $1,970 area now seems to have emerged as immediate support ahead of the 100-day Simple Moving Average (SMA), currently around the $1,959 region. This is followed by the weekly swing low, around the $1,946-$1,945 zone, below which the Gold price could accelerate the fall towards the $1,934 horizontal support. Any subsequent fall, however, is more likely to get bought into and remain limited near the $1,926-$1,925 region.
