Market Overview
Gold prices extended their rally, reaching an intraday high of $2,424. The trend was bolstered by softer US CPI data, sparking hopes for Fed rate cuts in 2024. The US Bureau of Labor Statistics revealed that consumer prices deflated in June, reigniting expectations for rate cuts and putting downward pressure on the US dollar, contributing to gold’s gains.
However, gold lost some gains as the People’s Bank of China (PBoC) stopped gold purchases in June, continuing the trend from May. By the end of June, China held 72.80 million troy ounces of gold.
Traders will closely watch upcoming US economic releases: the Producer Price Index (PPI) for June and the University of Michigan Consumer Sentiment survey for the same month.
Federal Reserve Rate Cut Expectations and Easing Inflation Boost Gold as Dollar Weakens
The US dollar continued its downward trend as Consumer Price Index (CPI) data showed easing inflation in June. Excluding volatile items like food and energy, the core CPI also dipped, increasing expectations that the Federal Reserve could cut interest rates in 2024. The CME FedWatch Tool now indicates an 85% probability of a quarter-point rate cut in September, up from 70%.
Robust labor market data, marked by fewer Americans filing for unemployment benefits, suggests ongoing economic strength amid declining inflation, presenting a balanced economic outlook.
June’s US CPI unexpectedly fell by 0.1% month-over-month, missing the anticipated 0.1% increase. Core CPI, excluding food and energy, also dipped from 0.2% in May to 0.1% in June, aligning with forecasts. Annually, headline inflation decreased to 3% from 3.3%, while core inflation dropped to 3.3%, below expectations and down from 3.4%.
In contrast, initial jobless claims for the week ending July 6 were 222,000, lower than the consensus of 236,000 and the previous week’s 239,000, indicating continued labor market strength.
Easing inflation and the increased likelihood of Fed rate cuts bolstered gold prices. Lower interest rates tend to weaken the US dollar and make gold more attractive as an inflation hedge and alternative investment.
Short-Term Forecast
Gold prices are expected to remain volatile with potential upward momentum. Buy above $2401.74, targeting $2425.01, $2436.18, and $2445.49. Watch for selling pressure below $2401.74.
Gold Prices Forecast: Technical Analysis
The price of Gold (XAU/USD) is currently at $2408.20, down 0.27%. On the 2-hour chart, the pivot point is at $2401.74. Immediate resistance levels are $2425.01, $2436.18, and $2445.49. Support levels are found at $2392.24, $2378.65, and $2368.96.
Technical indicators show the 50-day Exponential Moving Average (EMA) at $2380.84 and the 200-day EMA at $2354.03. The outlook remains bullish above $2401.74. However, a break below this level could lead to significant selling pressure.
