Gold price consolidates are hovering near two-week lows, struggling to gain significant momentum. Currently trading around the $2,300 mark, the market is keenly watching the upcoming US PCE inflation data. This report provides insights into how recent Federal Reserve decisions and other macroeconomic factors are influencing gold prices.
Impact of Federal Reserve Decisions
The Federal Reserve’s hawkish stance, adopted in its June meeting, continues to support elevated US Treasury bond yields. Policymakers favor only one interest rate cut by the end of the year. This scenario poses a challenge for gold price consolidates, a non-yielding asset.
Easing Inflationary Pressures
Despite the Fed’s stance, signs of easing inflation in the US keep the possibility of a September interest rate cut alive. This uncertainty prevents the US Dollar from fully capitalizing on its recent strength. Geopolitical tensions and political uncertainties provide some support for gold as a safe-haven asset.
Market Movers
- Fed’s Rate-Cut Uncertainty: The narrative of higher-for-longer interest rates supports US Treasury bond yields and a strong US Dollar, undermining gold prices.
- US Economic Data: Recent data showed a sharp decline in New Home Sales, indicating a slowing economy. However, USD bulls remain unaffected by these signs.
- Rate Cut Projections: The Fed projects one rate cut in 2024, but markets anticipate a possible rate cut by September, limiting further USD appreciation and supporting gold prices.
- Upcoming Data: Traders await the US Personal Consumption Expenditures (PCE) Price Index and other macro data, which could influence market dynamics.
Technical Analysis
From a technical perspective, gold’s failure to sustain momentum beyond the 50-day Simple Moving Average (SMA) suggests a bearish outlook. The breakdown below the short-term ascending trend-line near $2,314 supports this view. If gold prices fall below the $2,285 support level, they could reach the 100-day SMA near $2,250. The decline might extend towards $2,225-2,220, with potential further drops to the $2,200 mark.
On the other hand, a recovery attempt faces resistance near $2,314-2,315. Sustained strength beyond this point could lead to a short-covering rally, capped around the 50-day SMA near $2,338-2,340. Clearing this region might push prices towards $2,360-2,365, with a possibility of reclaiming the $2,400 mark and challenging the all-time high around $2,450.
Conclusion
The gold market is currently in a consolidation phase, with traders focusing on the upcoming US PCE inflation data. The Federal Reserve’s decisions and economic data releases will play crucial roles in determining the future trajectory of gold prices. For more detailed updates on gold prices, you can visit the Daily Gold Signal website and explore their Daily Gold Update section.
