GOLD Price Analysis – July 23, 2024

Daily Price Outlook

Despite a weaker US dollar, gold prices (XAU/USD) struggled to maintain their previous bullish momentum, falling to around $2,393.56 and hitting an intra-day low of $2,388.38.

This decline was influenced by a positive shift in market sentiment following unexpected interest rate cuts by the People's Bank of China (PBoC).

Additionally, expectations that the Federal Reserve will begin lowering borrowing costs in September, with two more rate cuts anticipated by year-end, have further bolstered market sentiment. This outlook has exerted pressure on safe-haven assets like gold.

Looking ahead, traders are cautious about taking strong positions as they await key US economic data, including Existing Home Sales and the Richmond Manufacturing Index, for short-term trading opportunities.

The primary focus will be on Thursday’s Advance US Q2 GDP report and Friday’s US Personal Consumption Expenditures (PCE) Price Index. Additionally, investors will closely monitor this week’s flash PMIs, which are anticipated to offer clearer insights into global economic trends.

Effects of Fed Rate Cut Expectations and Political Developments on the US Dollar and Gold Prices

On the US front, the US dollar has weakened recently due to expectations that the Federal Reserve (Fed) will soon cut interest rates. Investors anticipate the Fed will begin reducing borrowing costs in September, with potential for two additional rate cuts by year-end.

This outlook has led to a decline in US Treasury bond yields, reducing the attractiveness of bonds and putting downward pressure on the dollar. Consequently, gold prices have been supported, as lower yields enhance gold's appeal compared to holding cash or bonds.

On the other hand, investors have shown limited reaction to US President Joe Biden’s withdrawal from the 2024 election, as they anticipate potential benefits for the US stock market from Donald Trump’s proposed policies.

However, a second Trump presidency could result in higher inflation, which would drive up US Treasury bond yields. Increased bond yields make gold less attractive to investors, who would prefer the higher returns from bonds.

Therefore, expectations of rising inflation and bond yields under Trump could lead to lower gold prices, as investors might shift their funds away from gold in favor of more profitable bonds.

Impact of People’s Bank of China Rate Cuts on Global Market Sentiment and Gold Prices

Moreover, global market sentiment has improved following unexpected interest rate cuts by the People's Bank of China (PBoC). The PBoC reduced key rates, including the one-year and five-year loan prime rates, by 0.1 percentage points each.

This move surprised investors, especially after a recent meeting did not offer immediate economic stimulus. The rate cuts have boosted global risk appetite, encouraging investment in riskier assets.

However, this shift has posed a challenge for gold, traditionally a safe-haven asset during times of uncertainty, leading to downward pressure on its prices.

Thus, the unexpected rate cuts by the People’s Bank of China have made investors more willing to take risks, which has reduced gold's attractiveness as a safe-haven asset.

GOLD (XAU/USD) - Technical Analysis

Gold (XAU/USD) is trading at $2388.83, down 0.02%. The 4-hour chart analysis reveals crucial levels that could guide market participants. The pivot point stands at $2404.13, acting as a critical level for market direction.

Immediate resistance is seen at $2420.88, followed by $2436.35, and then $2454.06. These levels indicate potential barriers to upward movements. On the downside, immediate support is identified at $2384.48, with further support at $2369.02 and $2350.56. These levels are essential for traders to watch for potential rebounds or further declines.

The Relative Strength Index (RSI) is currently at 33, suggesting that gold might be in oversold territory, which could indicate a potential for a rebound. However, the 50-day Exponential Moving Average (EMA) is at $2415.98, reinforcing the bearish outlook below this level.

Given the technical setup, the recommended trading strategy is to sell below $2400, with a take profit target at $2373 and a stop loss at $2420. This strategy aligns with the current bearish trend, considering the resistance levels and the RSI indicator.

In summary, gold's technical outlook remains bearish below the $2404.13 pivot point. A break above this level could shift the sentiment to a more bullish stance, while maintaining below this level supports the bearish trend.

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