Price of Gold Fundamental Daily Forecast – Low Volume has Traders Searching for Catalyst

We’re likely to see a lot of two-sided trading over the near-term with the European Central Bank set to meet on July 25, and the Fed on July 31. At this time, all we can say is be careful buying strength or selling weakness unless you have strong volume on your side.
James Hyerczyk
Comex Gold and US Dollar

Gold prices are trading slightly lower on Thursday amid profit-taking following an early session surge. Today’s earlier rally may have been fueled by some light speculative buying tied to yesterday’s strong rally. Volume and volatility have been well-below average this week, which makes any attempt to breakout in either direction suspect. In other words, without a solid shift in the fundamentals, it’s been difficult to buy strength or sell weakness.

At 09:09 GMT, August Comex gold futures are trading $1423.10, down $0.10 or -0.01%. Spot prices may have hit a multi-year high on Wednesday, but futures remained capped by a pair of tops at $1441.00 and $1442.90. For that matter, prices have also been underpinned by bottoms at $1401.30, $1387.50 and $1384.70 for nearly a month.

There is a bias to the upside because the major central banks have been cutting or are expected to cut interest rates. In the U.S. markets, traders have priced in a 100% chance of a 25-basis point rate cut at the end of the month. With Fed Chairman Jerome Powell essentially confirming this rate cut, bullish gold traders are now searching for the next catalyst to drive prices through the recent resistance levels.

The focus for gold bulls at this time is whether there will be a 50-basis point rate cut in July, and if not, what the Fed plans to do in September, October and December. At this time, there is about a 25% chance of a half-a-point rate cut when the central bank meets on July 30-31.

Recent economic data and the stock market at or near all-time highs, seem to be indicating that the Fed is going to have a hard time justifying a series of aggressive rate cuts at this time. This is helping to keep a lid on prices.

Compounding the issue over aggressive rate cuts include robust job growth in June, higher-than-expected consumer inflation and better retail sales data. On Wednesday, the Fed reported that the U.S. economy continued growing at a “modest” rate in recent weeks, with consumers continuing to spend and a “generally positive” outlook overall even in the face of disruptions caused by the U.S. trade policy.

Daily Forecast

The early price action suggests we may be in for another day of sideways trading. The market was headed in that direction on Wednesday until comments from hedge fund kingpin Ray Dalio drove prices sharply higher. His remarks about a “paradigm shift” in investing is a long-term event. However, due to the thin trading conditions on Wednesday, speculative buyers were able to take advantage of the situation, hoping to drive prices through their monthly highs.

On the data front, on Thursday, traders will get the opportunity to react to U.S. economic data from the Philadelphia Fed Manufacturing Index, Weekly Unemployment Claims and the Conference Board Leading Index.

We’re likely to see a lot of two-sided trading over the near-term with the European Central Bank set to meet on July 25, and the Fed on July 31. At this time, all we can say is be careful buying strength or selling weakness unless you have strong volume on your side.

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