The gold (XAU) market experienced a modest ascent of 0.22% yesterday, maintaining its range within the confines of 2,320–2,340 for the second consecutive day.
Implications for Traders
The value of gold has exhibited minimal fluctuations in recent days. For XAUUSD to breach the resistance threshold of 2,340, fresh lackluster U.S. data is essential. Such data would amplify the prospects of a Federal Reserve rate cut in September, providing a bullish impetus for XAUUSD. Monday’s data unveiled that U.S. manufacturing activity dwindled for the third successive month in June, while the downturn in commodity prices touched a six-month nadir, suggesting that inflation might persist in its descent. This week promises a plethora of pivotal reports that could shed more light on the trajectory of U.S. interest rates.
Presently, numerous analysts predict an upswing in investment demand for gold, which could potentially absorb nearly the entire output from mines in the forthcoming year. Nonetheless, certain risks could impose downward pressure on gold. Primarily, the reduced optimistic outlook for retail gold demand in China, owing to import quotas, is a significant concern. Additional risks encompass diminished demand from central banks or a postponement in the anticipated rate cuts by the Fed. According to Reuters, ‘Fed Bank of New York President John Williams stated that he continues to believe price pressures are abating back to the levels targeted by the central bank,’ as he remarked on Sunday.
The trajectory of XAUUSD this week might become clearer today following Federal Reserve Chairman Jerome Powell’s address at 1:30 p.m. UTC. Should his tone lean more dovish, suggesting further rate cuts this year, XAUUSD could ascend to 2,380 and beyond. Conversely, any hawkish rhetoric hinting at persistent inflationary pressures could drive the pair down towards the 2,300 support level.