Gold Price steadies near $1,725 as falling wedge, US inflation tease bulls at yearly low

• Gold Price struggles around 10-month low, stays inside a bullish chart pattern.
• Risk-on mood fades as traders approach key US inflation data for June.
• Mixed concerns over China, recession also confuse XAUUSD traders.

Gold Price (XAUUSD) retreats to $1,725 heading into Wednesday’s European session. In doing so, the precious metal fades the early-day rebound from the yearly low while staying inside a weekly falling wedge bullish chart pattern. That said, XAUUSD's weakness could be linked to the downbeat performance of Eurostoxx 50 Futures, as well as a rebound in the US Dollar Index (DXY). However, mixed concerns surrounding China’s covid conditions and economic growth, as well as fears of inflation, test the gold traders ahead of the US Consumer Price Index (CPI) for June.

Gold Price awaits US inflation

Gold remains directionless as traders remain cautious ahead of the key US inflation, especially after the record high of the one-year US inflation expectation and hawkish Fed bets. Also highlighting the importance of the US CPI is the IMF’s recent downward revision of economic forecasts and mostly priced in a 75 bps rate hike from the Fed.

Also read: Gold fell to support but is unlikely to turn higher soon

Inflation

Risk-on mood fades

Risk-on mood fails to stay on the table for long as traders consider hidden fears for the world’s largest economies, namely the US and China, not to forget Europe. Recently, the International Monetary Fund (IMF) released fresh forecasts for the US economy, which in turn raised concerns about the previous Memo from the White House. That said, That said, the IMF cuts US 2022 GDP growth projection to 2.3% from 2.9% in late June, due to revised US data. On the other hand, “The US economic data, including the June jobs report, are not consistent with a recession in the first or second quarters,” the White House said in a memo released on Tuesday, as reported by Reuters. While portraying the mood, stock futures in the US and Europe remain pressured after witnessing an upbeat start to the day.

Yield curves favor XAUUSD bears

With the inverted yield curve between the 10-year and the 2-year US Treasury bonds, fears of the recession weigh on Gold Price. That said, the 10-year Treasury yields snap a two-day downtrend to print mild gains around 2.97% whereas its 2-year counterpart loses 0.08% to 3.05% at the latest. It’s worth observing that the yields have been sluggish so far today and challenge XAUUSD traders.

China troubles traders

China’s covid updates are mixed and challenge the market sentiment, as well as the gold traders. It’s worth noting that a jump in Shanghai’s covid numbers is well within the quarantine area and the latest lockdown in Wugang city of Henan Province also appears short-term, which in turn probes coronavirus woes surrounding China. Alternatively, comments from the Chinese Customs Official weigh on the Gold Price. “China's foreign trade still faces instabilities and uncertain factors even as trade growth in May and June reversed the declining trend in April, said Li Kuiwen, a spokesman for the General Administration of Customs, during a news conference in Beijing on Wednesday,” per Reuters.

Risk reversals hint at a cautiously bearish bias

One-month risk reversal (RR) on the XAUUSD printed the biggest daily fall in four days the previous day, to -0.085. With this, the spread between the call options and put options braces for the fifth consecutive weekly fall. However, the magnitude of the RR appears to have been slowing of late, especially on the weekly basis. Hence, gold traders appear to keep the bearish bias but turn cautious off late, which in turn could have restricted the commodity’s latest moves.

Gold Price technical outlook

Gold Price bounces off yearly low while staying inside a one-week-old falling wedge bearish chart pattern. In doing so, the yellow metal remains near the support line of the stated chart formation and hence portrays limited action.

It’s worth noting that the downbeat RSI (14) conditions and lower-high, as well as lower-low, formations challenge the gold buyers until the quote stays below the $1,740 hurdle.

Before that, the 100-HMA level surrounding $1,737 could guard the immediate recovery moves of the XAUUSD.

In a case where the Gold Price rises beyond $1,740, a downward sloping trend line from June 29, near $1,775 by the press time, will be in focus.

On the contrary, the lower line of the stated wedge, close to $1,719, joins multiple levels marked since April 2021 to highlight the $1,719-25 area as the short-term key support, a break of which could direct Gold Price to an ascending support line from March 2021, at $1,708 at the latest. In a case where XAUUSD remains bearish past $1,708, the $1,700 threshold could lure the bears.

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