#Gold Technical Analysis# 24K99 News On Thursday (June 27), due to weak economic data supporting the expectation that the Fed will start cutting interest rates this year, the US dollar is under pressure, and spot gold has risen nearly $30 after a sharp decline in the previous trading day. On Friday, investors will face the heaviest economic data of the week-the US PCE inflation data, which is expected to trigger a big market.
Spot gold closed up $29.26 on Thursday, up 1.27% at $2327.30 an ounce.
FXStreet analyst Christian Borjon Valencia pointed out that on Thursday, after the US economic data was released, the US dollar index broke away from the monthly high of 106.13 and gold rose more than 1%.
Weak US economic data weighed on the dollar.
Phillip Streible, Chief Market Strategist for Blue Line Futures, said that some of the data that has been released supports the gold market, mainly that wholesale inventory is lower than expected and the final value of GDP has dropped significantly, which has lowered the US dollar index and boosted gold prices.
The US dollar fell 0.2% against a basket of currencies, and the benchmark 10-year Treasury bond yield fell to 4.2845%, making gold more attractive to non-dollar buyers.
Data shows that corporate equipment spending in May fell, and exports also fell, pushing up the trade deficit in goods, highlighting the weakening economic momentum. The US government confirmed that the growth of first-quarter GDP final value has slowed sharply.
US first-quarter GDP annualized quarterly growth was slightly revised up to 1.4%, but lower than the 3.4% in the last three months of 2023. The GDP report also showed weak consumer spending. US consumption growth was downgraded from the previous forecast of 2% to 1.5%.
Monex USA foreign exchange trader Helen Given said: "The market seems to be more concerned about the decline in personal consumption, which is definitely a sign of a slowdown in the US economy. It is expected that the first-quarter GDP will be lower than the highest level, but the decline in consumption indicates that the economy may further slow down."
Data released on Thursday also showed that initial jobless claims fell to 233,000 in the week ending June 22. However, in the week ending June 15, continued claims increased by 18,000 to 1.839 million, the highest level since the end of 2021.
Analysts said that the number of people who continued to claim unemployment benefits in the United States last week rose to the highest level since the end of 2021, which is a warning signal that indicates that the unemployed will take longer to find jobs, which is not a positive signal for the economy.
Another set of data shows that the index of second-hand housing contracts in the United States in May unexpectedly fell to a record low, and the rise in mortgage rates and high house prices deterred potential buyers.
The National Association of Realtors (NAR) said on Thursday that the index of second-hand housing contracts fell 2.1% to 70.8, the lowest level since 2021. Economists surveyed by Bloomberg estimated a median increase of 0.5%.
At the same time, new orders for US manufacturing unexpectedly fell in May, indicating that corporate equipment spending weakened in the second quarter. The monthly rate of core durable goods orders, excluding aircraft and military hardware, fell 0.6% in May, the largest drop so far this year. Economists surveyed by Reuters previously predicted a slight increase of 0.1%.
US PCE inflation data is coming
At 20:30 on Friday Beijing time, the US May personal consumption expenditure (PCE) price data will be released, which may reveal the Fed's interest rate path.
Authoritative media surveys show that the monthly rate of US May PCE price index is expected to remain unchanged, compared with an increase of 0.3% in April. The US May PCE price index is expected to increase by 2.6% year-on-year, compared with an increase of 2.7% in April.
As for more critical core data, the survey shows that the monthly rate of core PCE price index in the United States in May is expected to increase by 0.1%, compared with an increase of 0.2% in April; the year-on-year rate is expected to increase by 2.6%, compared with an increase of 2.8% in the previous period.
As the most favored inflation indicator of the Fed, the year-on-year change of core PCE price index has a greater impact on policy makers.
Analysts pointed out that the soon-to-be-released US May core PCE price index will become a short-term catalyst for market trends.
According to LSEG's "Fed Observation" data, investors generally adhere to cutting interest rates twice this year, while the Fed is expected to cut interest rates only once.
As gold does not generate interest, a reduction in interest rates will reduce the opportunity cost of holding gold and enhance its attractiveness to investors.
What will happen to gold after a big rise?
Valencia pointed out that since the head and shoulders pattern remains intact, it suggests that gold prices may further decline. Although gold prices rose on Thursday, they have not challenged the neckline of the head and shoulders pattern. A decisive breakthrough of the neckline could negate this pattern and pave the way for a test of the June 21st high of $2,368 per ounce.
(Spot gold daily chart source: FXStreet)
The relative strength index (RSI) is below the 50 midpoint, indicating favorable momentum for sellers.
Valencia said the next support level for gold prices will be $2,300 per ounce. Once effectively broken, the price is expected to fall to the low of $2,277 per ounce on May 3rd, followed by the high of $2,222 per ounce on March 21st. If the above levels are breached, the price will continue to fall, and sellers will target the head and shoulders pattern target of $2,170-$2,160 per ounce.
Valencia added that on the other hand, if gold reclaims $2,350, it will look to higher key resistance levels, such as the cycle high of $2,387 per ounce on June 7th. Once this barrier is broken, the price will challenge $2,400 per ounce.
At 08:33 Beijing time, spot gold was reported at $2,325.62 per ounce.