XAUUSD H1 Idea

Gold prices are heading towards their third consecutive weekly gain, buoyed by speculations that the U.S. Federal Reserve will pause interest rate hikes after the July meeting. However, a recent surge in the dollar and bond yields, driven by robust U.S. labor market data, caused a slight setback for the precious metal on Thursday.

Gold's Rise Supported by Fed Rate Hike Expectations:
The ongoing rise in gold prices has been underpinned by the prevailing belief that the Federal Reserve will implement its final rate increase during the current tightening cycle. According to a Reuters poll, economists anticipate a 25-basis point hike during the upcoming Fed meeting scheduled for July 25-26. Lower interest rates make holding zero-yielding bullion more appealing to investors seeking safe-haven assets.

Real Interest Rates Pose a Limitation:
Despite the positive sentiment, gold's short- to medium-term upside potential could be hampered by real interest rates. In the absence of significant risk events, the precious metal may experience limited growth as it currently appears to be trading with froth, rendering it susceptible to volatility.

Market Indicators and Cautious Bullish Sentiment:
The dollar index (DXY) experienced a slight decline of 0.1%, while U.S. Treasury yields rose, contributing to the bullish sentiment surrounding gold. China's foreign exchange regulator expressed its commitment to maintaining a stable yuan exchange rate to avoid sharp volatilities.

The Technical Picture:
In technical analysis, Comex Gold exhibits cautiously bullish sentiment. The current 4-hour price stands at $1973.00, slightly above the previous 4-hour close at $1971.40. The market shows positive momentum, trading above both the 200-4H and 50-4H moving averages at $1950.20 and $1964.50, respectively. The 14-4H RSI reading of 51.50 indicates balanced momentum, supporting the mildly stronger sentiment.

Resistance Levels and Breakthrough Potential:
However, the current price nearing the main resistance area of $1980.00 to $2000.50 suggests potential hurdles to further gains. Market participants are keenly observing for a breakthrough of this resistance level, which would sustain the bullish momentum. On the downside, failure of the 200-hour moving average at $1950.20 as support could leave the market vulnerable to declines.

Upcoming Events and Market Direction:
In the short term, gold prices are likely to remain resilient, anticipating a pause in interest rate hikes by the Federal Reserve. Traders will closely monitor central bank meetings and currency developments for further market direction. Notably, the Bank of Japan meeting is on the horizon and economists predict a 25-basis point interest rate hike by the European Central Bank, adding to market uncertainties.

Conclusion:
Gold prices are set for a third consecutive weekly gain amidst expectations of the Federal Reserve halting interest rate hikes. However, the metal's short-term upside potential may be limited due to real interest rates and lack of significant risk events. Traders should closely monitor technical indicators and key resistance levels to gauge the market's direction accurately. As economic events unfold, investors will carefully navigate the market for potential opportunities.