- The price of gold remains firmly supported at a crucial level, and it is poised to achieve its third consecutive weekly increase due to growing expectations of a rate cut by the Federal Reserve.
- US Producer Price Index surpasses expectations; University of Michigan Consumer Sentiment declines, while inflation expectations moderate.
- The CME FedWatch Tool suggests a high probability of a rate cut in September, with a 94% chance. As a result, the US Dollar Index experienced a decline of over 0.40%, reaching a value of 104.09.
The price of Gold remained above $2,400 on Friday, following a brief dip to $2,391. The precious metal is poised to continue its upward trend for the third week in a row, fueled by speculation that the Federal Reserve (Fed) could initiate its easing cycle in September. According to data from the US Department of Labor, factory prices exceeded expectations, but this did not provide support for the Greenback, which acted as a favorable factor for the precious metal.
The XAU/USD is currently trading at $2,415, with little to no change. According to the latest data from the US Bureau of Labor Statistics, the Producer Price Index (PPI) experienced a slight increase in June, surpassing analysts’ predictions. The preliminary July reading for Consumer Sentiment at the University of Michigan has worsened; however, there has been a moderation in inflation expectations.
Based on the CME FedWatch Tool, traders indicate a high probability that the Fed will potentially reduce rates by 0.25% in September.
As a result, the yields on US Treasury bonds are declining, providing a boost to the non-yielding metal, which thrives in an environment of low yields. The coupon on the US 10-year Treasury note is currently yielding 4.19%, which is two basis points lower than its initial price.
According to sources cited by Barron’s, while inflation is decreasing, it is not expected to completely vanish. Investing in gold and gold mining companies can be a smart strategy to protect against inflation.
Meanwhile, Federal Reserve officials have maintained a cautious approach to changing monetary policy. According to Chicago Fed President Goolsbee, the latest inflation data looks positive and may accelerate the Fed’s progress towards its inflation targets.
According to St. Louis Fed President Alberto Musalem, the current interest rate level is suitable for the existing conditions. He anticipates an economy growth rate of 1.5% to 2% this year.
Meanwhile, the US Dollar Index (DXY), which monitors the Greenback against a collection of six currencies, dropped by over 0.40% to 104.09.
Market Update: Gold Price Remains Unchanged After US PPI Report
- In June, the US Producer Price Index (PPI) saw a 0.2% month-on-month increase, surpassing the anticipated 0.1% and surpassing May’s 0%. The core Producer Price Index (PPI) increased by 0.4% on a month-on-month basis, exceeding the predicted growth of 0.2%.
- Annually, the Producer Price Index (PPI) increased from 2.4% to 2.6%, surpassing the predicted rate of 2.3%. The rate of underlying inflation rose to 3%, marking an increase from 2.6%.
- The UoM Consumer Sentiment experienced a decline from 68.2 in June to 66.0 in July. The projected inflation rate for the next year remained in line with expectations, standing at 2.9%, slightly lower than the previous estimate of 3%.
- The US Dollar Index (DXY), which monitors the worth of a collection of six currencies in relation to the US Dollar, experienced a decline of over 0.30% and settled at 104.12.
- Based on the CME FedWatch Tool, the likelihood of a rate cut in September has increased to 88%, compared to 85% on Thursday.
- The December 2024 Fed funds rate futures contract suggests that the Fed is expected to adjust its policy by 49 basis points (bps) by the end of the year, which is an increase from the previous day’s estimate of 39 bps.
- Gold prices experienced a slight decline as the People’s Bank of China (PBoC) chose to pause its gold purchases in June, similar to its decision in May. China possessed a staggering 72.80 million troy ounces of the valuable metal by the conclusion of June.
Technical Analysis: Gold Buyers Pause as the Price of Gold Remains Steady Above the $2,400 Mark
The price of Gold remains steady above $2,400 for the second consecutive day following a clear break of the neckline of the Head-and-Shoulders pattern. Buyers currently have the upper hand in terms of momentum. However, they are taking a break before attempting to push prices even higher, as indicated by the stagnant Relative Strength Index (RSI).
That said, the most favorable direction to take is the positive side. The XAU/USD faces its initial resistance at the highest level reached this year, which stands at $2,450. Beyond that, the next significant milestone is the $2,500 mark. On the other hand, should Gold drop below the $2,400 mark, the subsequent area of interest would be the July 5th peak at $2,392. If approved, XAU/USD is expected to reach $2,350.