Early in the American session, gold (XAU/USD) is trading at around 1,713. The metal is still weighed down by bearish pressure. The price is likely to fall in the next few hours towards the bottom of the downtrend channel at around 1,690 and could even reach -2/8 Murray at 1,687.
Treasury yields are pulling back which could help gold rebound, but we should expect it to trade back above 1,718 (-1/8 Murray).
On Wednesday, investors found out that the annual rate of consumer inflation in the US climbed to 9.1% in June, the highest level in four decades, which adds pressure on the Federal Reserve to continue raising the interest rate. This led the market to expect a 1.00% rise in the interest rate at the next meeting.
Yesterday in the American session, gold could not overcome 1,750. Just at this level, it crosses a downtrend line which acted as a strong barrier and prevented gold from extending its technical rebound.
Gold is currently trading below -1/8 Murray which could be a negative sign. Hence, we could expect a drop towards the psychological level of 1,700. If this level is lost, gold could quickly fall towards the area -2/8 Murray at 1,769 and could even hit the low 2021 in the area of 1,650.
As for the upside, bearish pressure could ease if the metal settles above 1,718. Only a daily close above the 21 SMA and a sharp break above the downtrend channel around 1,737 could confirm the start of a gold rally. If so, the price could reach 1/8 Murray at 1,781.
On the 4-hour chart, we can see the formation of a Japanese candlestick called a pin bar. This is a sign of a probable recovery in gold. It will be confirmed provided that the price holds above the low of 1,700.
