Gold (XAU/USD) trades in the familiar territory of the $2,330s on Tuesday, amid a subdued market mood following a mixed session for Asian stocks and a decrease in investor appetite for tech stocks on Monday.
Gold trades about a third of a percent lower on Tuesday, still stuck in a range, amid a cautious market mood as investors await fresh macroeconomic and political news.
A key focus will be the US Personal Consumption Expenditures (PCE) Price Index for May, due on Friday, which is the Federal Reserve’s (Fed) preferred inflation gauge.
Speeches from Fed members Lisa Cook and Michelle Bowman on Tuesday could offer further insights into the trajectory of US interest rates, a key driver of gold prices as it affects the opportunity cost of holding the non-yielding asset.
On Monday, San Francisco Fed President Mary Daly said she does not believe the Fed should cut rates until it is confident that inflation is heading towards 2%. However, Daly cautioned against ignoring the labor market, suggesting that if unemployment rises, the Fed could cut rates to support demand and employment, according to Reuters.
Market-based probabilities of an interest rate cut at (or before) the Fed’s September meeting remain relatively high at 67%, compared to around 50% last week, according to the CME FedWatch tool, which uses Fed Funds Futures prices to calculate chances. Such a cut would likely be bullish for gold trading range.
Geopolitical Tensions and Their Impact on Gold Trading Range
Geopolitical factors are significant drivers of gold due to its safe-haven qualities. Upcoming elections in France and the United Kingdom could add uncertainty to the geopolitical landscape. Polls indicate a risk of a far-right shift in France, while in the UK, the Labour Party is expected to win on July 4, but the right-wing Reform Party is gaining support amid fresh allegations of corruption against the Conservatives.
Tensions remain high in the Middle East after a US-backed proposal to end the eight-month war in Gaza fell apart. Israeli Prime Minister Benjamin Netanyahu agreed only to a “partial ceasefire,” according to Aljazeera.
Fears of an “all-out” war with Lebanon persist after the Israeli government advised residents of northern Israel, evacuated due to the escalating conflict with Hezbollah, not to return home until the end of August, as reported by Israeli media.
Russia has accused the US of responsibility for a strike that killed at least four people, including children, and injured 151 others on a crowded beach in Crimea. Russia’s foreign ministry warned of retaliation. The ATACMS missiles that caused the damage were US-made, but the US denied responsibility, saying it “regretted any loss of civilian life” and that Ukraine made its own “targeting decisions,” according to Aljazeera.
Technical Analysis: Gold Trading Range Breakout Reversal
Although gold broke above a key resistance level at the 50-day Simple Moving Average (SMA) and a trendline connecting the May 7 and June 20 highs, it failed to maintain its rally. The precious metal peaked at $2,369 on June 21 before falling back below the trendline.
This break technically invalidated the bearish Head-and-Shoulders (H&S) pattern forming on the daily chart. However, the inability of bulls to sustain the upside has left the outlook unclear. The H&S remains invalid, but a more complex topping pattern might still develop, potentially proving bearish. In other words, a multi-shouldered bearish H&S might still form.
If the pattern’s neckline at $2,279 breaks, it would confirm a reversal lower, with a conservative target at $2,171 and a secondary target at $2,105.
Conversely, gold could still find support and continue higher. The original break above the trendline and the 50-day SMA suggested an initial target in the mid $2,380s (June 7 high). It is still possible to reach this target despite the recent fallback.
A break above $2,350 would confirm a run up to the June 7 high, and further breaking above that might indicate a continuation to the all-time high of $2,450.
Overall, the trend may remain sideways in both the short and medium terms, but gold continues to trend upward in the long term.
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For daily updates on gold prices and market trends, visit Daily Gold Signal. Stay informed with our daily gold updates.
