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Gold Analysis: Spot gold prices remain stable ahead of key data

2024-07-02

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Spot gold rebounded after falling below the 2,320 mark in New York trading on Monday (July 1), and was reported at $2,327.70 per ounce, up 0.06%.

Investors continued to digest the latest inflation data in the United States, and gold prices hovered around $2,325 per ounce. Last Friday, the Federal Reserve's preferred core inflation indicator slowed to the lowest annual rate since 2021. This raised hopes that price growth is moving closer to the target rate and supported expectations that the Fed will cut interest rates twice this year.

Expectations of rate cuts from other central banks also supported gold prices. The Bank of England is expected to cut interest rates after the British general election, while the People's Bank of China (PBOC) is also expected to cut interest rates further to support economic stimulus measures. Investors will now focus on the US employment report and the minutes of the Federal Open Market Committee meeting to be released this week to clarify the timing of the Fed's rate cut.

In addition, physical demand for gold in India, the world's second-largest gold consumer, was sluggish last week as gold prices continued to rise. Gold prices rose about 5% in the second quarter and 14% in the first half of the year, according to data from the gold trading platform, as impending interest rate cuts by major central banks made holding non-interest-bearing gold assets more attractive.

In addition to monetary policy, strong demand for gold from major Asian central banks, especially the People's Bank of China, pushed up precious metal prices in the first half of the year, reaching a record high of $2,450 an ounce in May.

U.S. personal consumption expenditures (PCE) inflation released last Friday was in line with expectations, indicating that price pressures have eased, supporting the Federal Reserve's case for lowering borrowing costs this year. Core PCE prices rose 0.1% from the previous month, the smallest increase in six months, while the annual growth rate fell to 2.6%, the lowest level since the beginning of 2021. The probability of a rate cut in September rose to 66% from 64% before the crisis. The probability of a rate cut by November also rose to 78% from 76%, and rose to 95% from 94% in December.

The Federal Reserve's preferred measure of core inflation in the U.S. economy fell to its lowest annual rate since 2021, raising hopes that price growth is moving toward its target at the expected pace and supporting expectations that the Fed will cut interest rates twice this year.

Meanwhile, Donald Trump was seen as the winner of the recent U.S. presidential debate, which supported the dollar early in the session as his policies could fuel inflationary pressures. With the Federal Reserve lagging other major central banks in easing policy, the dollar is expected to end June up about 1.2% and gain 1.3% in the second quarter.

Another factor weighing on gold was that the 10-year U.S. Treasury yield remained around 4.3% on Friday, still well below a two-week high of 4.35%, as the latest economic data showed a favorable environment for the Federal Reserve to cut interest rates this year. However, bond yields pared losses after UM's final estimates showed a smaller slowdown in U.S. consumer sentiment than previously expected.

Combined with mixed data and events during this period, these results still provide the necessary backdrop for the Fed to begin a rate-cutting cycle in September, with nearly 70% of market positions reflecting this. In addition, the yield on the benchmark 10-year Treasury note will be close to where it started in the second quarter.

Gold Technical Analysis

On the daily chart, gold prices still tend to move to the downside, with the $2,300/oz support level being the first target for bears. In the event of a break below $2,300, the next most important support levels would be $2,285 and $2,270/oz, and we would tend to buy gold from this level without risk.

On the other hand, if gold prices stabilize above the $2,355/oz resistance level, it would stimulate bulls to control the trend. In the end, we still tend to buy gold at every downside level.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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Gold Analysis: Spot gold prices remain stable ahead of key data

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