Current gold prices have remained above $2,400 as of Friday, despite dipping to a low of $2,391 earlier. This marks the third consecutive week of gains, fueled by expectations that the Federal Reserve (Fed) may initiate an easing cycle in September. Recent data from the US Department of Labor indicated a rise in factory prices, which, however, did not strengthen the US Dollar, providing a favorable environment for gold.
Current Market Overview
As of the latest trading session, XAU/USD is stable at $2,415. The US Bureau of Labor Statistics reported a modest increase in the Producer Price Index (PPI) for June, surpassing analyst expectations. Although the preliminary Consumer Sentiment reading from the University of Michigan for July declined, inflation expectations have shown signs of moderation.
Traders using the CME FedWatch Tool anticipate a 94% chance that the Fed will reduce rates by 25 basis points in September. Consequently, US Treasury bond yields are falling, which benefits gold as a non-yielding asset. The yield on the US 10-year Treasury note stands at 4.19%, slightly lower than its initial value.
Insights from Experts
Barron’s reports that while inflation is decreasing, it is not expected to vanish entirely. This makes gold and gold mining stocks appealing as a hedge against inflation. Fed officials have been cautious about making abrupt policy changes. Chicago Fed President Goolsbee mentioned that the latest inflation data appears “favorable,” which might expedite the Fed’s journey toward its inflation targets.
St. Louis Fed President Alberto Musalem commented that the current interest rates are suitable for prevailing conditions and expects economic growth to range between 1.5% and 2% this year. Additionally, the US Dollar Index (DXY), which measures the dollar against a basket of six currencies, fell over 0.40% to 104.09.
Market Movers: Gold Price Stability Post US PPI
The June US Producer Price Index increased by 0.2% month-on-month, outperforming the expected 0.1% and rising from May’s 0%. The Core PPI also rose, climbing by 0.4% month-on-month, exceeding the forecast of 0.2%. Annually, the PPI increased from 2.4% to 2.6%, surpassing expectations of 2.3%. Underlying inflation ticked up to 3%, a rise from 2.6%.
Consumer sentiment fell from 68.2 in June to 66.0 in July. Inflation expectations for the coming year remained stable at 2.9%, down from 3%. The US Dollar Index (DXY) fell over 0.30% to 104.12. The odds of a rate cut in September have increased to 88%, up from 85% the previous day. Futures contracts indicate that the Fed will likely ease policy by 49 basis points by the end of the year, up from 39 the day before.
Technical Analysis: Current Gold Prices Consolidate
Current gold prices are consolidating above $2,400 for the second consecutive day after breaking through the Head-and-Shoulders neckline. While momentum favors buyers, the Relative Strength Index (RSI) suggests they are taking a pause before attempting to push prices higher. The path of least resistance appears upward.
The first resistance level for XAU/USD is the year-to-date high of $2,450, followed by the significant $2,500 mark. Should gold prices drop below $2,400, the next demand zone will be the July 5 high of $2,392. If that level is breached, prices could continue downward to $2,350.
In summary, the current gold prices remain robust above $2,400, supported by market expectations and technical indicators. For more insights and daily updates, visit Daily Gold Signal and check the latest news in our Daily Gold Update.
