GOLD Price Analysis – July 12, 2024
Daily Price Outlook
Despite the release of softer-than-expected US consumer inflation figures, which boosted bets for a September interest rate cut by the Federal Reserve, Gold (XAU/USD) has failed to extend its three-day winning streak.
It edged lower around the 2,401 level, hitting an intra-day low of 2,400. This downward movement can be attributed to the uptick in US bond yields and renewed US dollar demand.
Additionally, the bullish sentiment surrounding the equity markets prompted some selling of the safe-haven precious metal during the European session on Friday.
Looking ahead, traders are now focused on the upcoming release of the US Producer Price Index (PPI) and the University of Michigan Consumer Sentiment survey for potential market-moving cues later in the North American session.
US Dollar Rebounds Despite Rate Cut Expectations, Bolstering Gold Prices
On the US front, the broad-based US dollar edged higher from a nearly three-month low despite expectations of a September rate cut by the Federal Reserve, driven by softer inflation figures.
This rebound was supported by a rise in US Treasury bond yields and better-than-expected Initial Jobless Claims, which fell to 222K for the week ending July 6. Investors now see a 90% chance of a rate cut in September, as per the CME Group's FedWatch Tool.
Additionally, Fed officials noted that improving inflation figures could justify one or two rate cuts this year, though they remain cautious about recession risks.
On the data front, the US Consumer Price Index (CPI) dipped in June for the first time in over four years, with the yearly rate slowing to 3% from 3.3% in May. Core CPI rose 0.1% for the month and 3.3% YoY, missing estimates. Investors now see over a 90% chance of a rate cut.
Therefore, the expectation of a Federal Reserve rate cut in September, driven by softer inflation data, has bolstered gold prices as lower interest rates typically increase the appeal of non-yielding assets like gold.
GOLD (XAU/USD) - Technical Analysis
Gold's recent rally has lost steam, with prices dipping slightly to $2409.45 per ounce. The precious metal now finds itself at a crucial juncture, testing the pivotal $2413.74 support level.
A decisive break below this level could trigger further downside momentum, potentially pushing prices towards the $2397.20 support zone. Conversely, a rebound from this level could signal renewed buying interest, with the potential to retest recent highs.
The 50-day Exponential Moving Average (EMA), currently at $2377.62, is a key indicator to watch. This moving average has served as a reliable support level in recent months, and a break below it would likely amplify bearish sentiment.
However, as long as prices remain above this EMA, the medium-term outlook remains cautiously optimistic.
The Relative Strength Index (RSI), a momentum indicator, currently sits at 68. While this suggests the market is overbought, it's important to note that gold has maintained elevated RSI levels during its recent uptrend.
Therefore, traders should exercise caution and wait for confirmation before acting on this signal.
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