Gold (XAU/USD) is stabilizing just below a critical barrier zone while drifting sideways.
The stock market stopped trading after last week’s strong surge, which witnessed gold jump from $2,285 to $2,340.
Ahead of important US economic data and new Federal Reserve instructions, traders are currently in a wait-and-watch position.
The US economy appears to be slowing, according to recent indications. The Producer Price Index (PPI) also cooled last month, and the Consumer Price Index (CPI) increased by just 0.2%.
Monetary relaxing is now more likely as a result of these lower inflation numbers. Because the metal provides no yield and advantages in low-rate conditions, lower rates usually increase the perceived value of gold.
Technical Chart Shows Key Resistance Ahead
By exactly the same time, there has been upward pressure on the US dollar. The Dollar Index (DXY) has dropped a total of 1.8% in the last couple of weeks, hitting a new quarterly low of 103.9.
While a declining dollar makes gold more accessible for foreign consumers, demand grows.
The technical chart indicates important resistance up ahead.
Technically speaking, gold is getting close to the top of a declining channel that has existed since the middle of April.
Several times in the past, sell-offs have been prompted by this support zone, which is close to $2,358.
Around the lower edge of the channel, slightly above $2,100, is the closest resistance. A few weeks ago, gold broke beyond the channel’s checkered midline, or about $2,230, indicating a short-term bullish outlook.
But a sustained breakout over $2,358 supported by significant trade volume is necessary for a real trend reversal.
Another drop toward the $2,150–$2,100 range is still conceivable if the breakthrough doesn’t work.
Gold is reaching a turning point. Geopolitical concerns, a declining dollar, and predictions of rate cuts are examples of bullish factors that offer strong support.
