Key Takeaways
- Gold prices have surged to multi-week highs, benefiting from a weaker US dollar and disappointing US economic data.
- The technical outlook is bullish, with gold closing above key moving averages and showing positive RSI momentum.
- Immediate resistance is at $2,390 and $2,400, with support around $2,340-$2,330.
- The upcoming US CPI report and Powell’s testimony will be critical in shaping gold’s short-term direction.
- Potential dovish signals from the Fed and softer inflation data could support further gains, while stronger data might weigh on prices.
Market Dynamics and Recent Performance
Gold prices have been on an upward trajectory, hitting multi-week highs as market sentiment shifts due to various economic and geopolitical factors. The price of gold advanced beyond $2,380 last week, driven by broad-based weakness in the US dollar following disappointing US macroeconomic data. The ISM Manufacturing PMI dropped to 48.5, and the Prices Paid Index, an inflation component, fell sharply, signaling cooling inflation. Additionally, comments from Federal Reserve Chairman Jerome Powell at the European Central Bank’s Forum suggested that the disinflation trend might be resuming, further weakening the dollar and supporting gold.
Technical and Fundamental Influences
Technically, gold’s near-term outlook appears bullish. The metal closed above the 50-day and 20-day Simple Moving Averages (SMA) for three consecutive days, with the Relative Strength Index (RSI) indicator rising towards 60. This reflects a buildup of bullish momentum. Immediate resistance is seen at $2,390, with further resistance at $2,400. Once gold climbs above these levels and confirms them as support, it could target the all-time high of $2,450.
On the downside, support has formed around $2,340-$2,330, where the 20-day SMA, the 50-day SMA, and the Fibonacci 23% retracement converge. A drop below this level could signal a short-term reversal.
Fundamentally, the upcoming week’s trading will be influenced by key US economic reports, including the June Consumer Price Index (CPI) and Federal Reserve Chairman Powell’s two-day Congressional testimony. The CPI report is expected to show a 0.2% rise in headline CPI, with core CPI remaining unchanged. A cooler-than-expected inflation reading could reinforce expectations of Fed rate cuts, providing further support for gold. Conversely, stronger inflation data might lead to reassessment of rate cut expectations, potentially weighing on gold prices.
Looking Forward
Next week’s focus will be on Powell’s testimony and the US CPI data. Powell’s remarks will be scrutinized for any clues on future monetary policy, while the CPI report will provide insights into inflationary trends. Market participants are anticipating potential dovish signals from Powell, which, combined with softer inflation data, could continue to support gold’s upward momentum. However, any unexpected shifts in economic data or Fed rhetoric could introduce volatility.
