Has the gold rally yet reversed? The consolidation pattern has not been broken

After Federal Reserve Chair Jerome Powell questioned the rationale for July's rate cut at a semi-annual congressional hearing last week, gold extended its short-term decline, falling below the 20-day and 50-day simple moving averages (SMAs). Moreover, recent US data also support this trend, with data showing signs of rising inflationary pressures and a drop in initial jobless claims.

Nonetheless, the supporting trend line drawn from December 2024 still functions as a safety net around 3270. As the July 9 tariff deadline approaches, key differences between the U.S. and its trading partners persist, meaning a deal could take longer to finalize, or a quick fix could leave key issues unresolved.

Daily chart of spot gold

From a technical standpoint, short-term risks remain skewed to the downside due to weaker momentum in the Relative Strength Index (RSI) and the Moving Average Convergence Divergence Index (MACD). The RSI hit a new low below the neutral 50 mark. If short pressure intensifies in the next few trading days, gold prices could retest the upper track of the previous downside channel 3215, followed by the rising support line 3150 since October 2024. If it falls below this level, the decline could accelerate towards the psychological level 3000, or even lower to 2970.

On the upside, if a strong catalyst pushes gold back above the 20-day and 50-day moving averages (currently 3320-3350), the next resistance level could be in the 3400-3435 range. A decisive close above this boundary could pave the way for gold prices to move towards 3500, or test resistance near 3530, which could then be targeted at 3600.

Overall, despite weaker technical indicators, gold has not yet fully lost its potential for bullish reversals. As long as prices remain within the sideways structure above 3150, downward pressure could still lead to a "buy the dip" strategy.