Technical Analysis

GOLD Price Analysis – July 01, 2024

By LonghornFX Technical Analysis
Jul 1, 20244 min

Daily Price Outlook

Gold prices (XAU/USD) kicked off the new week with strong bullish momentum, soaring to notable heights around $2,327 per ounce and peaking at an intraday high of $2,329.

This upward surge is driven by mounting expectations of upcoming rate cuts by the Fed in September and December, which have led to a depreciation of the US dollar and bolstered gains in gold prices.

In the meantime, a risk-averse market sentiment, fueled by ongoing geopolitical tensions and uncertainty stemming from France's sudden snap election, has further heightened the safe-haven allure of gold.

Impact of US Economic Data and Monetary Policy Expectations on Gold Prices

In the US, the broad-based US dollar has notably declined, reversing sharply from a nearly two-month high following the release of inflation data as it strengthened market confidence in interest rate cuts, anticipated in September and December.

The expectation of these rate cuts diminishes the appeal of the US dollar, prompting investors to seek gold as a hedge against inflation and currency devaluation, thereby bolstering gold prices.

Regarding economic data, the US Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) Price Index moderated to an annual rate of 2.6% in May, down from 2.7% in April.

Meanwhile, the core PCE Price Index, which excludes food and energy prices, also decelerated from 2.8% in April to 2.6% in May. This marks the lowest annual rate for the core index since March 2021.

Looking ahead, market participants will closely monitor the upcoming release of the US ISM Manufacturing PMI. This data, alongside broader risk sentiment, is anticipated to have a significant impact on commodities throughout the week.

Therefore, the easing inflationary pressures indicated by the PCE Price Index could continue to weigh on the US dollar, providing further support to gold prices as investors seek inflation-hedging assets amidst expectations of Fed rate cuts.

Impact on Gold Prices: Political Instability and Economic Challenges

On the political front, uncertainty surrounding the outcome of France's election and issues raised in Biden's debates are contributing to heightened political instability, bolstering gold (XAU/USD) as a safe-haven asset.

Meanwhile, China's weakening manufacturing and services sectors indicate economic challenges that could potentially dampen industrial demand for gold.

However, the slight uptick observed in the Caixin Manufacturing PMI suggests resilience in Chinese manufacturing, which might exert some upward pressure on gold prices.

In economic data, China's manufacturing activity recorded its second consecutive monthly decline in June, while services activity hit a five-month low. Despite these trends, Monday's release of China's Caixin Manufacturing PMI for June unexpectedly rose from 51.7 to 51.8, surpassing expectations of 51.2.

Therefore, the heightened political instability in France and economic challenges in China increase demand for gold as a safe-haven asset.

GOLD Price Chart - Source: Tradingview
GOLD Price Chart - Source: Tradingview

GOLD (XAU/USD) - Technical Analysis

Gold prices have edged slightly higher today, with the metal currently trading at $2,325.745 on the 4-hour chart. The pivot point for today is established at $2,321.81, providing a crucial reference level for traders.

Immediate resistance levels are identified at $2,328.77, $2,337.48, and $2,344.92, suggesting potential price ceilings that could test the bullish momentum. On the downside, immediate support is noted at $2,317.38, with further support levels at $2,312.31 and $2,306.29, indicating floors that could halt a bearish trend.

Technical indicators are showing mixed signals. The Relative Strength Index (RSI) stands at 52, which indicates neutral momentum, neither overbought nor oversold. The 50-day Exponential Moving Average (EMA) is positioned at $2,319.18, closely aligning with the pivot point, suggesting this level as a critical area for short-term direction.

A price movement above this pivot point can potentially shift the market sentiment towards a bullish outlook, while a decline below it may trigger bearish trends.

In conclusion, the technical outlook for Gold (XAU/USD) today leans towards a cautious bullish sentiment, provided prices remain above the pivot point of $2,321.81. Traders are advised to consider entering long positions above this level, with a target take profit at $2,336 and a stop loss at $2,315 to mitigate potential downside risks.

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