Gold (XAU/USD) has shown signs of recovery, trading higher in the $2,410s as concerns about “stagflation” drive its rebound. Stagflation, a blend of stagnant growth and rising inflation, has become a central focus for economists. This term gained prominence following the Philadelphia non-manufacturing Business Outlook Survey, which highlighted weak growth alongside high prices. The recent decline of 5.4% in US Existing Home Sales further indicates an economic slowdown, as noted by analysts at Rabobank.
2. Gold Price Rebound Factors Amid US Economic Slowdown
Gold’s rebound is fueled by increasing expectations of interest rate cuts from the Federal Reserve (Fed). Reduced interest rates increase the appeal of non-yielding assets such as Gold. The interplay of economic indicators and central bank policies will continue to be crucial in shaping the Gold price rebound factors.
Traders are awaiting additional US economic data later this week. Key reports include the US Q2 Gross Domestic Product (GDP) growth data on Thursday and the Personal Consumption Expenditures (PCE) Price Index for June on Friday. The Q2 GDP growth is projected at 1.9%, up from 1.4% in Q1. The PCE price index is expected to increase by 0.1% after being flat in May. Although recent consumer inflation trends suggest the Fed may cut rates in September, further cuts are uncertain. Positive data could delay rate cuts, impacting Gold’s rebound factors.
3. Kamala Harris’ Influence on Gold Price Rebound Factors
US Vice President Kamala Harris has secured enough delegates to claim the Democratic nomination, leading to a reduction in the “Trump trade” and lower US bond yields. These factors are beneficial for Gold. Harris’s potential lead in polls over Trump suggests a less inflationary economic outlook if she wins, contributing to the Gold price rebound factors.
The release of the preliminary US S&P Global Purchasing Managers Index (PMI) for July on Wednesday will provide further insights into the global economy, potentially offering new trading opportunities for Gold and impacting its rebound factors.
4. Technical Analysis: Gold Price Rebound Trends
Gold appeared to break out of its sideways range last week but failed to maintain the momentum and fell back inside the range. It might be necessary to adjust the range with a slanting top, indicating that the new high on July 17 was still part of the range, rather than a true breakout.
The revised analysis suggests that Gold is in a downtrend within the widening range, potentially moving towards the floor and the 100-day Simple Moving Average (SMA) at approximately $2,320. The 50-day SMA at $2,360 could offer temporary support. A break below Monday’s low of $2,383 would signal further downside toward the range low.
Alternatively, surpassing the new all-time high of $2,483 could indicate a higher high, suggesting a breakout and an extended uptrend. This move might target the next upside range of $2,555-$2,560, based on the 0.618 Fibonacci ratio.
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