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Gold Analysis: Stability Prevails Ahead of Key Data

  • Gold prices are hovering around the $2325 per ounce level as investors continue to assess the latest US inflation data.
  • Last Friday, the Federal Reserve's preferred measure of core inflation slowed to its lowest annual rate since 2021.
  • It is raising hopes that price growth is converging towards the target pace and supporting expectations for two rate cuts by the central bank this year.

Gold Analysis Today 01/07: Stability Prevails (graph)

Expectations of lower interest rates elsewhere also supported bullion prices, with cuts expected from the Bank of England after the UK election, and additional rate cuts expected from the People’s Bank of China to support economic stimulus efforts. Now, investors will focus on the US jobs report and the FOMC minutes due this week for clarity on the timing of the Fed’s rate cut.

Elsewhere, India, the second-largest gold consumer, saw lackluster physical demand for gold last week amid rising prices. According to gold trading platforms, gold prices gained about 5% in the second quarter and jumped 14% in the first half of the year, as impending interest rate cuts by major central banks made holding non-interest-bearing bullion assets more attractive.

The Federal Reserve’s preferred measure of core inflation in the U.S. economy slowed to its lowest level since 2021 on an annual basis, raising hopes that price growth is converging on its target at the expected pace and supporting expectations that the central bank will cut interest rates twice this year. Expectations of lower interest rates elsewhere have also supported precious metals, with the Bank of England expected to cut rates shortly after the U.K. election, while the People’s Bank of China is expected to deliver further rate cuts and set the stage for more economic stimulus.

Alongside monetary policy, strong demand for gold from major central banks in Asia, particularly the People’s Bank of China, has lifted precious metals prices in the first half of the year, sending gold to a record high of $2,450 an ounce in May.

According to gold market influences, the US dollar index hovered around 105.9 on Friday after US personal consumption expenditures (PCE) inflation came in line with expectations and pointed to easing price pressures, bolstering the Federal Reserve’s case for lowering borrowing costs this year. According to an official report, core PCE prices rose 0.1% from the previous month, the smallest increase in six months, while the annual rate fell to 2.6%, the lowest since early 2021. The probability of a rate cut by September increased to 66% from 64% before the crisis. The odds of a rate cut by November also rose to 78% from 76% and to 95% from 94% by December. Meanwhile, the US presidential debate, where Donald Trump was seen as the winner, also supported the greenback early in the session, as his policies could add to inflationary pressures. The US dollar is on track to end June up about 1.2%, and the second quarter is stronger by 1.3%, as the Federal Reserve lags other major central banks in easing policy.

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     Another factor weighing on gold is  the yield on the US 10-year Treasury note held near the 4.3% mark on Friday, remaining well below a two-week high of 4.35% as the latest economic data pointed to a backdrop that favors rate cuts by the Fed this year. However, yields across the curve pared their declines after final estimates from UM showed that US consumer sentiment slowed less than previously expected. Combined with mixed earnings and spending data during the period, the results still provide the necessary backdrop for the Fed to begin its rate-cutting cycle in September, as reflected in the positions of nearly 70% of the market. Moreover, the yield on the benchmark 10-year Treasury note is set to close in the second quarter close to where it began.

    Gold Price Forecast and Analysis Today:

    According to the performance on the daily chart above, the price of gold is still leaning more towards the downside and the support of $2300 per ounce will remain the crowning glory of the bears' control over the trend. If the break occurs, the next most important support levels will be $22285 and $2270 per ounce, which we prefer to return to buying gold from without risk. On the other hand, if it stabilizes above the resistance of $2355 per ounce, it will stimulate the bulls' control. Finally, we still prefer to buy gold from every downward level.

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    Mahmoud Abdallah
    About Mahmoud Abdallah
    Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.

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