Gold News: XAUUSD Turns Higher, but Can Bulls Sustain the Momentum?

Cooler CPI Lifts Gold Past $4,070

Spot Gold (XAUUSD) was trading at $4,073.54 at 12:56 GMT Tuesday, up $72.35 or 1.81%. The move started before the data was released. Buyers stepped in at a two-week intraday low early in the session and flipped the selling before the CPI number even dropped. When June inflation came in soft, gold ran through the afternoon and never looked back.

Treasury yields dropped across the curve and the U.S. Dollar Index fell to 100.705, down 0.56% on the session. Aggressive short-covering added fuel once the rate repricing started.

Daily Spot Gold (XAUUSD) Technical Analysis

Spot gold is trading firm after a spectacular early morning reversal on Tuesday. Earlier today, the market briefly pierced yesterday’s low but a major trader came in with enough buying power to reach a new intraday high. Aggressive short-covering also helped drive spot gold from $3983.54 to $4104.05.

Tuesday’s move has brought the focus back to the short-term retracement zone at $4072.40 to $4041.65. Overcoming this area will bring us closer to forming a potentially bullish secondary higher bottom and put the minor retracement zone at $4162.36 to 4214.34 back on the radar.

If the momentum is strong enough to overcome $4214.34 then it could easily challenge the 50-day moving average at $4333.30.

On the downside, the inability to sustain today’s early reversal or overcome any of the key resistance levels will mean the market is still in the strong hands of the short-sellers. This could lead to retest of $3983.54, $3942.10 and an eventual breakdown under the long-term support at $3886.46.

Another thing that would help this market sustain a rally would be if buyers started aggressively taking out offers instead of just passively bidding. If you’re day trading, you should be watching for that price action. And if you’re trading for longer-term moves then you would like to see this type of buying interest in order to get out of this tight trading range and into more open spaces on the charts.

Warsh Stayed Hawkish but the Data Moved

Warsh’s first Congressional testimony as Fed Chair landed in a very different room than the one the market expected 24 hours ago. Monday’s setup had crude running, yields rising, and a hot CPI looking likely. He was supposed to walk into a room where the market was bracing for a hawkish message. Instead the CPI took the urgency out of the conversation before he started talking.

He stayed on message regardless.

“The Fed’s number one objective is to get monetary policy right, or as near to it as we possibly can,” Warsh said.

That is the language of a Fed Chair who is not ready to signal easing even with the softest CPI in months on the table.

Fed Governor Christopher Waller was not as diplomatic. Rates may still need to move higher if inflation stops improving, and he said it plainly. The data says hold. The Fed says don’t get comfortable. September is still a live meeting and gold traders have not priced that risk out.

June Inflation Killed the July Hike

Headline CPI rose annually, and came in well below the economists’ consensus. Monthly prices also fell more than forecast and core inflation slowed too. Every line in the report pointed the same direction and gold traders needed exactly that kind of number to keep the pressure off yields.

The market repriced immediately. July rate hike odds collapsed on a single print. September is still priced around 60% but the momentum flipped from when-do-they-hike to how-long-do-they-hold. That is a different trade entirely and gold was already positioned for it before the number dropped.

The 10-year Treasury yield fell 10 basis points to 4.525%. The 2-year dropped 12 basis points to 4.149%. The 30-year moved down to 5.053%. When the entire curve moves like that on one print, gold does not need a second invitation.

Crude Near $90 Threatens the Next Print

Crude pushed toward $90 per barrel Tuesday and that number is already working against whatever relief June’s CPI delivered. The energy component fell in June’s report. That will not repeat if crude stays at these levels through July.

Gold got the print it needed today but the oil market is building the case for a reversal before the next CPI even comes out. The rate trade gave gold the green light Tuesday. Crude at these levels is the one thing that can take it away.

What to Watch

Tuesday gave gold the softest CPI in months, lower yields across the curve, and a weaker dollar. The question is how long crude at these levels lets the rate trade work. If energy prices stay elevated the July inflation data could take back everything June delivered.

Technically, buyers came in at a two-week low before Warsh began his testimony and the CPI data was released. The price action suggests new buying and short-covering combined for the reversal. If a secondary bottom forms and there is follow-through buying, bullish traders could have a shot at the 50-day moving average.

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