Gold trading insights (XAU/USD) remained stable in the $2,360 range on Tuesday, recovering from a significant sell-off on Monday. This initial weakness stemmed from the People’s Bank of China (PBoC) not purchasing gold for two consecutive months after an 18-month streak of increasing reserves.
1. Impact of Trump’s Influence on Bond Markets
Gold trading insights also fell due to the US Treasury bond market reacting to the potential political risk of former President Donald Trump winning the upcoming US presidential election. If Trump wins, expected tax cuts and increased borrowing could worsen the US fiscal situation, potentially leading to higher inflation and interest rates. High interest rates make gold, a non-interest-bearing asset, less attractive to investors.
2. Political Factors Affecting Gold Prices
Trump’s potential presidency is driving bond prices down and yields up, strengthening the US Dollar (USD) due to its high correlation with yields. This strength in the USD impacts the gold price, as gold is primarily traded in USD. Following a recent debate where President Biden struggled to respond effectively, Trump’s lead in opinion polls has grown. Critics have questioned Biden’s cognitive abilities, and if Biden steps down, Kamala Harris may not have the same wide appeal.
Trump’s campaign gained more credibility after the US Supreme Court ruled he had partial immunity regarding the 2020 election-related events. This ruling reduces the likelihood of legal issues disrupting his campaign.
3. Upcoming Events Influencing Gold Prices
A key event that could affect gold prices is Federal Reserve (Fed) Chairman Jerome Powell’s testimony to the Senate Banking Committee. Powell is expected to maintain a cautious, data-dependent approach, keeping investors uncertain about the Fed’s next move.
4. Technical Analysis: Gold’s Potential Movements
Gold recently formed a two-bar reversal pattern after hitting major resistance at $2,388 on June 7. This pattern, indicating a potential short-term reversal, consists of a long green day followed by a long red day of similar size.
XAU/USD Daily Chart Analysis
The current outlook for gold is unclear, but a pullback to the 50-day Simple Moving Average (SMA) at $2,342 is possible. If gold surpasses Friday’s peak of $2,393, it may continue to higher highs, aiming for the all-time high of $2,451. The bearish Head & Shoulders pattern formed from April to June has been invalidated by the recent recovery, though a more complex pattern might still emerge. If gold breaks below the neckline at $2,279, a reversal to $2,171 is possible, aligning with the 0.618 ratio of the pattern’s height.
In summary, gold’s trend is sideways in the short and medium term, but the long-term trend remains upward.
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