GOLD Price Analysis – July 16, 2024

Daily Price Outlook

Gold price (XAU/USD) extended its upward trend, remaining well bid around the 2,440 level and hitting an intraday high of 2,443.

This upward movement is attributed to dovish comments from Federal Reserve Chair Jerome Powell regarding monetary policy, which have increased the appeal of precious metals. Lower borrowing costs make non-yielding assets like gold more attractive to investors.

Investors appear convinced that the US central bank will begin a rate-cutting cycle in September, a sentiment reaffirmed by Powell's recent remarks. This outlook has kept US Treasury bond yields depressed, benefiting the non-yielding yellow metal.

However, the pace of gold price gains could slow following Monday's economic data, which revealed weaker-than-expected second-quarter economic growth in China, reflecting sluggish domestic demand.

Impact of Fed Chair Jerome Powell's Dovish Comments on Gold Prices

On the US front, Federal Reserve Chair Jerome Powell's dovish comments on Monday bolstered precious metals like gold, as lower borrowing costs make them more attractive to investors. Powell indicated confidence in inflation nearing the Fed's target sustainably, suggesting potential interest rate cuts ahead.

Meanwhile, Fed Bank of San Francisco President Mary Daly noted a cooling inflation trend, supporting the view that inflation is heading towards 2%, though she emphasized the need for more data before deciding on rates.

Market expectations, reflected in CME Group’s FedWatch Tool, now show an 85.7% likelihood of a 25-basis point rate cut in September, up from 71.0% last week. Eyes are now on the upcoming US Retail Sales data for June for further economic insights.

Thus, the Federal Reserve Chair Jerome Powell's dovish stance and expectations of interest rate cuts have boosted gold prices, with lower borrowing costs enhancing the metal's attractiveness to investors seeking non-yielding assets.

Impact of China's Economic Slowdown and Trade Tensions on Gold Prices

On the other hand, gold prices face some challenges due to recent economic data indicating slower-than-expected growth in China's GDP for the second quarter, driven by weak domestic demand.

Meanwhile, the ongoing third plenum of the Chinese Communist Party's 20th National Congress, scheduled from July 15 to 18, underscores ongoing economic policy discussions amidst this economic slowdown.

Standard Chartered forecasts potential rate cuts by the People's Bank of China and adjustments to the reserve requirement ratio in response to the GDP deceleration. China's economic growth remains uneven, further complicated by escalating trade tensions; the US and EU recently imposed new tariffs on Chinese electric vehicles, impacting global trade dynamics.

Therefore, the potential economic slowdown in China, coupled with ongoing policy adjustments and trade tensions, may weigh on gold prices, as investors monitor developments that could affect global economic stability and demand for safe-haven assets.

GOLD (XAU/USD) - Technical Analysis

Gold (XAU/USD) is currently priced at $2,437.32, showing an increase of 0.19%. The 4-hour chart reveals critical price levels, with the pivot point at $2,445. Immediate resistance is found at $2,442.50, with further resistance at $2,453.71 and $2,466.69.

On the downside, immediate support is situated at $2,419.84, followed by $2,403.30 and $2,391.59.

The Relative Strength Index (RSI) is currently at 69, indicating that gold is nearing overbought territory, suggesting that traders should monitor for potential signs of a pullback. The 50-day Exponential Moving Average (EMA) is at $2,403.58, supporting the ongoing bullish trend.

Gold's recent performance has been buoyed by market expectations of a potential interest rate cut by the Federal Reserve in September. These expectations have kept U.S. Treasury yields depressed, making non-yielding assets like gold more attractive.

The metal's current bullish trend is further reinforced by global economic uncertainties and geopolitical tensions, which typically drive investors towards safe-haven assets.

Traders looking to enter the market should consider buying above $2,430, targeting a take-profit level at $2,445, while setting a stop-loss at $2,422 to manage potential downside risks. Maintaining these strategic levels is crucial as it allows traders to capitalize on the prevailing bullish momentum while mitigating potential losses.

Related News

USD/CAD Price Analysis – July 16, 2024

AUD/USD Price Analysis – July 16, 2024

GOLD Price Analysis – July 15, 2024