Market Overview
Gold prices (XAU/USD) extended their gains, attracting further bids around the $2,368 level and reaching an intraday high of $2,370. The rally is linked to increasing speculation that the US Federal Reserve may start cutting rates as early as September, weakening the US dollar and boosting gold prices.
Political uncertainties in Europe and globally also supported gold prices. However, the halt in China’s central bank gold purchases for the second consecutive month may limit gains.
Investors are now focused on Federal Reserve Chair Jerome Powell’s second semi-annual testimony on Wednesday, along with speeches from Fed members Michelle Bowman and Austan Goolsbee. Additionally, the US Consumer Price Index (CPI) inflation data, scheduled for release on Thursday, will be closely monitored.
Fed Rate Cut Speculation Weakens US Dollar, Boosts Gold Prices
The US dollar is losing momentum as speculation grows that the Federal Reserve may cut rates as early as September. Fed Chair Jerome Powell emphasized that the central bank will make decisions on a meeting-by-meeting basis and warned that keeping rates too high for too long could harm economic growth.
Despite recent modest progress in inflation data, Powell indicated that more positive data is needed before considering rate cuts. Financial markets now see a 74% chance of a September rate cut, up from 71% last Friday, according to the CME FedWatch tool.
This speculation has bolstered gold prices, as the prospect of lower interest rates weakens the US dollar and increases the appeal of non-yielding assets like gold.
Political Uncertainties and China’s Gold Purchases Impact Gold Prices
Increasing political uncertainties in Europe and globally could boost gold prices, given its status as a traditional safe-haven asset. However, China’s central bank recently halted gold purchases for the second consecutive month, which might prompt traders to scale back their bullish positions.
China, the world’s largest gold consumer, kept its gold reserves at 2,264 tonnes in June, pausing after 18 months of continuous purchases. This pause limits gold’s upward momentum despite favorable conditions from potential US rate cuts and geopolitical tensions.
Short-term Forecast
Gold prices are likely to remain supported around $2,367 due to speculation of US rate cuts and geopolitical tensions. However, China’s halt in gold purchases may limit further gains.
Gold Prices Forecast: Technical Analysis
Gold (XAU/USD) is currently trading at $2,368.09, showing slight fluctuations. The pivot point at $2,363.18 is crucial, acting as a significant support level reinforced by the 50-day Exponential Moving Average (EMA) positioned at $2,362.22. Immediate resistance is identified at $2,371.49, followed by $2,381.38 and $2,393. These levels will be key in determining if gold can maintain its upward momentum.
On the downside, immediate support lies at $2,349.76, with further support levels at $2,340.04 and $2,331.03. The Relative Strength Index (RSI) is currently at 54, indicating a neutral market sentiment. The 50 EMA at $2,362.22 and the 200 EMA at $2,344.71 are acting as strong support levels, suggesting a robust foundation for potential bullish movements.
Given the current technical setup, traders should consider buying positions above $2,363. The support provided by the 50 EMA and the upward trendline increases the likelihood of a continued uptrend.
