- Gold futures settled at their highest levels in about six weeks, driven by expectations that the US Federal Reserve is close to ending the cycle of quantitative tightening.
- Gold was falling, but lower US inflation data and shifting investor estimations have supported the yellow metal in recent sessions.
- According to the trading, the gold price jumped toward the resistance level at $1984 an ounce. Overall, gold prices were trading at their best levels since June 6th. The price of the precious metal has increased by more than 8% since the beginning of the year 2023 to date.
In the same way, silver prices, the sister commodity to gold, rose above the $25 resistance level, and accordingly, the price of the white metal has increased by about 4.4% so far this year.
Market analysts say that the Fed's approach to the end of raising US interest rates and easing inflation were the main factors for the rise in gold and silver prices. The possibility of the Fed hitting the brakes and possibly cutting interest rates also helped support the metals market. On the economic front, US retail sales rose 0.2% in June, down from 0.5% in May, and below the consensus estimate of 0.5%. Last month, manufacturing and industrial production fell by 0.5% and 0.3%, respectively. Capacity utilization slowed to 78.9%.
On the other hand, concerns about Asia's largest economy prompted a warning from US Treasury Secretary Janet Yellen about possible multiplier effects, although she reiterated that she did not expect a recession in the United States, where the risk of inflation is less. Adding to optimism, the Fed may soon halt interest rate increases, which are usually negative for gold because it does not carry interest.
These hopes spark positive feelings towards the precious metal. Flows into bullion-backed exchange-traded funds on Monday showed holdings rising for a second day after a 19-day streak of declines, according to preliminary data compiled by Bloomberg. Meanwhile, money managers are finding more traction in gold, having increased net long positions to a five-week high.
Next week, the FOMC will hold its July two-day policy meeting. It is widely expected that officials will pull the trigger to raise interest rates by a quarter point. Before that, the returns of the US Treasury bond market were mixed in performance, as the yield for ten-year bonds fell 1.7 basis points to 3.772%. The two-month note rose 2.5 basis points to 5.398%, while the two-year note fell 0.008 basis points to 4.331%.
Gold is sensitive to movements in interest rates because it can affect the opportunity cost of holding unprofitable bullion.
Meanwhile, the gold market benefited from a firmer dollar as the US Dollar Index (DXY) rose 0.2% to above 100.00. But the DXY dollar index, which tracks the performance of the greenback against a basket of currencies, is down nearly 3% this month. A weaker price is beneficial for dollar-denominated commodities because it makes them cheaper for foreign investors to buy.
In other metals markets, copper futures fell to $3,814 a pound. Platinum futures fell to $992.30 an ounce. Palladium futures fell to $1307.00 an ounce.
Gold Technical Outlook
Returning to the technical analysis that we mentioned for the future of the gold price, we noted the importance of the resistance level of $1970 an ounce for the bulls to gain more positive momentum, and then there will be more talk about the possibility of moving towards the psychological resistance level of $2000 an ounce, and the jump in prices towards the resistance of $1985 an ounce yesterday confirms this.
On the other hand, according to the performance on the daily chart below, the gold price’s break of the support level at $1939 an ounce will be important for the bears to regain control over the trend.
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