- Gold prices are in a rebound mode this week, gaining above the $2419 resistance level and recovering from last week's losses that took the price down to the $2384 support level.
- In general, the price of gold stabilized near $2400 per ounce after declining for four consecutive sessions, as traders focused on upcoming US economic data to reinforce expectations of a US interest rate cut by the Federal Reserve.
- Key areas of focus include the advance estimate of second-quarter GDP growth, personal spending and income, and the June personal consumption expenditures price index, the Fed’s preferred inflation gauge.
Recently, according to the economic calendar, the headline inflation rate in the United States fell more than expected to 3% in June, its lowest level in one year, while the core inflation rate fell to 3.3%, its lowest level in more than three years. This has reinforced expectations that the Federal Reserve could begin cutting US interest rates as early as September, with traders now pricing in a 94% chance. Meanwhile, investors continued to assess the implications of President Joe Biden ending his re-election campaign and endorsing Vice President Kamala Harris instead.
As for the factors affecting the gold market, the US dollar stabilized as traders pondered the US political outlook. According to electronic trading platforms, the US dollar index stabilized around 104.4 on Tuesday as investors continued to assess the US political landscape following President Joe Biden’s decision to end his re-election bid and endorse Vice President Kamala Harris as the Democratic candidate.
However, former President Donald Trump continues to lead the race, although market participants have begun to back away from the so-called Trump trade that has been supporting the US dollar and Treasury yields.
On the monetary policy front, the Federal Reserve is widely expected to begin cutting US interest rates in September amid slowing inflation, with two more cuts expected before the end of the year. Investors now look ahead to key US economic data this week including flash PMIs, GDP and the PCE price index report. Recently, the dollar was rangebound against most major currencies but rose against the yuan, Australian and New Zealand dollars after the surprise interest rate cut by the Chinese central bank earlier this week.
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Another factor weighing on gold’s trajectory, the yield on the US 10-year note fell ahead of key economic data. The yield on the 10-year Treasury note fell to around 4.24% on Tuesday, breaking a three-day advance as investors brace for key US economic data this week. Also, keeping an eye on the latest US political developments. The benchmark yield had been under pressure in July as the Federal Reserve was widely expected to start cutting interest rates in September amid slowing inflation, with two more cuts expected before the end of the year.
On the political front, President Joe Biden dropped his re-election bid over the weekend and endorsed Vice President Kamala Harris as the Democratic nominee. However, former President Donald Trump continues to lead the race, although market participants have started to unwind the so-called Trump trade that supported the dollar and Treasury yields.
Gold Price Forecast and Analysis Today:
Gold recommendations today are that it is on an upward path as long as it is stable around and above the psychological resistance of $2,400 per ounce. With geopolitical tensions rising, central banks abandoning tightening and global purchases increasing to hedge gold, bulls may find opportunities to move strongly towards the resistance levels of $2,422 and $2,450 per ounce again. Ultimately, we still prefer to buy gold from every downside level.
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