Gold Prices Climb as US Dollar Weakens; Traders Anticipate Upcoming Fed Meeting.
Gold prices have rebounded from daily lows of $2,356, now standing at $2,385. The Federal Reserve’s preferred inflation measure shows mixed results, inching closer to the 2% target. US Treasury yields have fallen as bonds rally, indicating the possibility of several Fed rate cuts this year.
Gold made a comeback after dipping to a two-week low of $2,353, rising approximately 0.80% as investors anticipate that the Federal Reserve will reduce interest rates at the September meeting, following a soft inflation report. Currently, XAU/USD is trading at $2,385 after recovering from its daily trough of $2,356.
The US Bureau of Economic Analysis (BEA) reported that the Fed’s favored inflation indicator, the Personal Consumption Expenditure Price Index (PCE), increased by a tenth of a percent from May’s figures. Although the annual rate has decreased as expected through June, it is nearing the Fed’s 2% target.
In June, Core PCE increased by a tenth of a percent month-over-month, with the year-over-year rate remaining steady, slightly above expectations.
Following this data release, US bonds saw a rally, which led to a decline in US Treasury yields. The 10-year Treasury note fell by four and a half basis points to 4.202%.
According to Reuters, “Today’s mixed-to-weaker US data suggests diminishing inflationary pressures and slowing economic activity, potentially setting the stage for two Fed rate cuts later this year.”
Next week’s Federal Reserve meeting will be closely watched, with the central bank expected to maintain current interest rates. However, this meeting could signal the start of a rate cut at the September session.
Daily Market Update: Gold Recovers from Weekly Lows
In June, the US PCE index increased by 0.1% month-over-month and 2.5% year-over-year, aligning with expectations, though the annual rate decreased from 2.6%. Core PCE rose by 0.2% month-over-month, surpassing forecasts and the previous month’s increase. On an annual basis, Core PCE advanced by 2.6%, exceeding predictions and holding steady from the prior month.
The final University of Michigan Consumer Sentiment survey climbed to 66.4, slightly missing expectations of 66. Inflation expectations for the coming year decreased from 3% to 2.9%, while the five-year outlook remained steady at 3%.
According to data from the Chicago Board of Trade (CBOT), traders are anticipating a 55 basis points easing by year-end, as indicated by December 2024 fed funds rate futures.
Technical Analysis: Gold Price Recovery but Below $2,400
Gold prices are showing an upward trend, rebounding from two days of losses and forming a ‘bullish harami’ pattern on the chart. The Relative Strength Index (RSI) has moved above the 50-neutral mark, suggesting potential for further gains.
For XAU/USD, reclaiming the $2,400 level is crucial before targeting the psychological barrier of $2,450. A break above $2,450 could lead to testing the all-time high (ATH) around $2,483, with the $2,500 mark as a subsequent target.
Conversely, if XAU/USD continues to decline and drops below the 50-day moving average (DMA) at $2,359, further losses may follow. Support levels to watch include the July 25 low of $2,353 and, if breached, the 100-DMA at $2,324, potentially leading down to $2,300.
