XAU/USD breaks through $2,630 and targets lower lows

XAU/USD Current Price: $2,627.85

• US dollar gains, finding further support in a risk-adverse environment.
• The minutes of the FOMC meeting and the US Consumer Price Index stand out this week.
• XAU/USD is bearish in the short term and could accelerate the move below $2,624.50.

Spot gold is trading modestly lower for a fifth straight day, hovering around $2,645 per troy ounce after the United States (US) open. The XAU/USD pair has lost ground in recent days, though still far from suggesting an interim peak at the all-time high of $2,685.45 set in September.

Despite the recent rise in the US dollar, the shiny metal continues to attract investors as they face several different fronts. On one hand, the USD is benefiting from solid US macroeconomic data and reduced bets for a massive Federal Reserve (Fed) interest rate cut. On the other hand, speculative interest weighs in on rising tensions in the Middle East. Stocks finally turned north earlier in the week, with losses in the tech sector dragging down all major indexes and keeping the safe-haven metal afloat.

From a data perspective, the calendar provided little relevance this week, with the focus on upcoming US data. The Federal Open Market Committee (FOMC) will release the minutes of its September meeting on Wednesday. The document may miss the surprise factor after comments from Fed officials flooded the news following the meeting and following a standout non-farm payrolls (NFP) report.

On Thursday, the country will release September’s Consumer Price Index (CPI), which could gain relevance after strong employment data. US inflation has pulled back sharply after hitting a record high in 2022, but remains above the Fed’s target of around 2%. However, officials said they remain confident they will soon reach such a goal. Should the CPI figures come in higher than anticipated, investors may reduce bets on a November rate cut and thus provide the USD with an unexpected boost.

XAU/USD Short Term Technical Outlook

Technically, XAU/USD is in a consolidation phase, still mostly developing its moving averages on the daily chart. Even more, the 20 Simple Moving Average (SMA) maintains a strong upward slope well above the longer ones, while providing dynamic support around $2,620. At the same time, the Momentum indicator is flat well above its 100 line, while the Relative Strength Index (RSI) indicator is aiming slightly lower around 61, neither of which is enough to support a steeper decline.

Technical readings on the 4-hour chart offer a bearish neutral stance. XAU/USD is pushing its intraday lows, while a mildly bearish 20 SMA contains intraday advances. At the same time, a still bullish 100 SMA provides support. Finally, the technical indicators turned south into the negatives, maintaining the downslope. A steeper near-term decline could be expected on a break below $2,624.50, the immediate support area.

Support levels: 2,624.50 2,616.00 2,603.90

Resistance levels: 2,649.45 2,663.00 2,673.20