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Gold prices continue to fall

Gold Prices Continue To Fall

Gold prices continue to fall

as demand for US dollars rises, but there may not be much more downside.

 

 

 

15/7/2024,


• The beginning of the new week saw a decline in the price of gold due to some USD buying.


•Bets that the Fed would lower rates in September limit the gains in the USD and boost the metal.

• The political unrest in the US following Trump’s attempted assassination helps to contain losses.


The price of gold (XAU/USD) continues to decline in the early hours of Monday in Europe. Meanwhile, the commodity is still very close to reaching its highest level since May 22 reached last week, and it appears that more appreciation is in store given the Federal Reserve’s (Fed) dovish forecasts.

It appears that market players are certain that the Federal Reserve (Fed) will start reducing interest rates in September. This is expected to provide support for the unyielding yellow metal.


Moreover, the markets have factored in the chance that the Fed may reduce borrowing prices again in December.
This seems to be another factor supporting the price of gold denominated in US dollars while failing to help the US dollar (USD) capitalise on its slight rebound gains from a three-month low.

Aside from this, the US political unease following a purported attempt on the life of former US President Donald Trump and China’s economic difficulties support the favourable near-term prognosis for the XAU/USD.

Daily Digest Market Movers:

Declining Chinese macro data and Fed rate cut bets bolster the gold price.


• On Monday, the US Dollar gains some traction and reverses some of its recent losses to reach a three-month low.

This is perceived to put some pressure on the price of gold for the second day in a row.


• According to data released by the US Bureau of Labour Statistics on Friday, the Producer Price Index (PPI) for final demand increased by 2.6% annually in June, above forecasts of 2.3%.


• In addition, the political unrest following the abortive attempt on US presidential candidate Donald Trump’s life supports the greenback, even though forecasts of a dovish Federal Reserve may limit gains.

• Based on current market pricing, there is a 90% probability that the Fed will begin reducing interest rates in September. This confidence was increased by releasing a second, more moderate US consumer inflation report last Thursday.


• Moreover, the political climate in the US should generally control investors’ demand for riskier assets and provide some support for the safe-haven XAU/USD, encouraging prudence before taking positions that could result in larger losses. In contrast to the 5.3% annual growth in the first quarter of 2024, China’s economy grew by 4.7% during the second quarter of 2024, according to a study released earlier this week by the National Bureau of Statistics (NBS).

• In addition, China’s Fixed Asset Investment expanded by 3.9% YTD YoY in June compared to 3.9% expected and 4.0% last, while the country’s Retail Sales increased by 2.0% YoY in June compared to 3.1% expected and 3.7% earlier.


•The data obscured the somewhat better-than-expected publication of Industrial Production results, which came in at 5.3% YoY vs.
5.0% forecasts and pointed to increased economic uncertainty.


•In anticipation of Fed Chair Jerome Powell’s speech later in the North American session, traders are currently watching for short-term possibilities in the US Empire State Manufacturing Index report.


Technical Evaluation:

The price of gold is likely to retest its all-time high, which was achieved in May in the $2,450 range.

Technically speaking, Friday’s appearance of some dip-buying confirmed solid support close to the resistance breakpoint of $2,390-2,388. Additionally, oscillators on the daily chart continue to hold positive territory and remain outside of the overbought area. This implies that an upward trajectory is the least resistance to the price of gold. Therefore, a decline below $2,400 may still be viewed as a limited buying opportunity.


On the other hand, some follow-through selling might push the price of gold down to the $2,358 area, with some intermediate support around the $2,372-2,371 region.
The further decline could reveal the 50-day Simple Moving Average (SMA) support, which is now located around $2,350.

Conversely, the swing high from last week, which was about $2,425, appears to be an immediate barrier that the gold price is likely to aim over to challenge the all-time high, which was touched in May and is around $2,450. A persistent increase over the latter will be viewed as a new catalyst for optimistic traders and pave the way for the continuation of the commodity’s present upward trend, which has been evident for the last two weeks or so.


The US dollar’s value during the past week


The US Dollar (USD) percentage movement versus a list of major currencies over the last seven days is displayed in the table below. When compared against the New Zealand dollar, the US dollar was the strongest.

 

 

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