The upside potential in the market is limited as the greenback is mostly higher
Gold prices are back in positive territory on Tuesday following a short-lived dip to the $1,790 area seen yesterday. In this zone, the 20- and 100-DMAs converge, so the bullion derived support there to bounce back above $1,800 eventually. The fact that traders buy the dips may signal the overall upbeat outlook for the precious metal, at least in the near term.
Earlier in the day, gold prices encountered intermediate resistance in the $1,812 region to pull back slightly. The next hurdle arrives at $1,1818, followed by the key barrier for bulls represented by the 200-DMA (today at $1,827) last seen in mid-June.
In the short term, the upside potential in the gold market is limited as the greenback is mostly higher today. The USD index keeps rebounding ahead of the critical US inflation release as well as amid a cautious market mood. The upcoming CPI report may shed more light on the Fed’s timeline for monetary policy normalization.
Also, traders will closely monitor Fed Chair Jerome Powell’s testimony before Congress on Wednesday and Thursday. The central bank governor will deliver comments on the monetary policy and inflation outlook. Powell’s tone could affect the precious metal through dollar dynamics. If he strikes a hawkish tone, the greenback could rally across the board, thus pressuring the commodity.
In a wider picture, a decisive break above the mentioned 200-DMA would pave the way towards $1,860, followed by the $1,875 and the $1,900 barrier. On the downside, the $1,750 region continues to act as the key support that triggered a bounce late last month. The overall picture shows that the path of least resistance is to the upside for the time being while buyers should reemerge on potential dips.
