Gold Awaits New Data Release with Cautious Consolidation
The gold market often reacts to shifts in global financial stability and economic data releases, making it sensitive to a variety of market signals. Yesterday, the initial risk-off sentiment, driven by IT-related concerns, boosted investments in safe-haven assets like core bonds, causing German yields to drop significantly. However, as equities began to recover with the opening of US markets, this trend reversed.
The release of stronger-than-expected US Q2 GDP growth data at 2.8% quarter-over-quarter, along with positive contributions from private consumption and other economic indicators such as jobless claims and core durable goods orders, suggested sustained economic strength. These figures imply that the Federal Reserve may not need to pivot its policy direction imminently, calming some initial fears in the markets. However, the mixed price indicators, with the GDP price index lower than expected and the core PCE deflator higher, present underlying inflationary pressures, which could influence gold prices.
On the global stage, Asian equity markets showed signs of stabilization, though gains were limited, indicating ongoing caution among investors. The dollar experienced slight declines, further influencing gold’s attractiveness as an alternative investment. With the US dollar’s performance remaining mixed and key economic data on the horizon, such as US July spending and income data, gold investors will be keenly watching for signs that might dictate the Fed’s next moves. The expected cooling in the headline PCE inflation to 0.1% M/M and 2.4% Y/Y, along with a core measure projection of 0.2% M/M and 2.5% Y/Y, could sway Federal Reserve deliberations. This economic backdrop, coupled with fluctuating yields and the dollar’s performance, creates a complex environment for gold traders looking to navigate the intersecting currents of risk sentiment and monetary policy expectations.
The gold market is currently fluctuating around the weekly support level of $2365 (plus or minus $10), as discussed in the premium letter (21st July). However, the short-term trend remains negative. The daily chart below shows that gold dropped from the resistance area, as pointed out a few days ago. The area was highlighted by the trend line, and prices have also broken minor support of $2385. A weekly close below $2365 could put further pressure on the gold market, potentially driving it toward the $2290 level. Today’s Core PCE data will be crucial for the market, which can set the next direction for gold.
