#Gold Technical Analysis# 24K99 News On Thursday (July 26), the gold market suddenly encountered a violent sell-off, with spot gold prices plummeting nearly $33, dipping below $2,360/ounce at one point. On Friday, investors will face US PCE inflation data, which is expected to once again trigger violent market fluctuations.
On Thursday, spot gold closed sharply down $32.61, down 1.36% to $2,364.25 an ounce. During Thursday's New York session, the lowest price of gold fell to $2,353.05 an ounce, a new intraday low. Product structure, 10-30 billion yuan products operating income of 401/1,288/60 million yuan respectively.
The analyst 24K99 pointed out that the sharp drop in gold prices on Thursday was mainly due to investors taking profits after the recent rise in gold prices. In addition, strong U.S. GDP data stimulated the strength of the U.S. dollar, which is also unfavorable for gold.
FXStreet analyst Christian Borjon Valencia pointed out that after strong U.S. GDP data, gold prices fell more than 1%, and traders are currently focusing on U.S. PCE inflation data.
The U.S. Bureau of Economic Analysis on Thursday released a report showing that U.S. real gross domestic product (GDP) in the second quarter of the year increased at an annualized rate of 2.8% on a seasonally adjusted quarterly basis, higher than the expected value of 2% and the previous value of 1.4%.
Analysis shows that the U.S. second-quarter economic growth rate exceeded expectations, indicating that demand remains strong under the heavy pressure of borrowing costs.
Data also showed that the U.S. core PCE price index for the second quarter of the year increased at an annualized rate of 2.9% on a seasonally adjusted quarterly basis, higher than the expected value of 2.7% and the previous value of 3.7%.
Valencia said that after the Bureau of Economic Analysis report of better-than-expected U.S. economic performance in the second quarter of 2024, the dollar strengthened and affected gold, which tumbled to a two-week low on Thursday.
Jake Hanley, a portfolio specialist at Teucrium Trading, believes that strong GDP may reduce the urgency of Fed rate cuts, extending the time to maintain high interest rates, which is unfavorable for gold.
Due to the growing optimism about the Fed's rate cut in September, gold prices hit a historical high of $2,483.60 an ounce last week.
Profit-taking is the culprit for the plunge in gold prices.
Valencia pointed out that since gold prices hit a record high of $2,483 an ounce on July 17, spot gold prices have fallen about 5%. The decline in gold prices is mainly due to profit-taking.
Kelvin Wong, senior market analyst for OANDA Asia Pacific, said:"Fundamentally, there is nothing to put pressure on gold prices. Therefore, we seem to see some profit-taking, and from a technical point of view, gold prices may continue to decline."
Edward Meir, an analyst at Marex, said that the weakness of U.S. stocks would of course trigger some profit-taking trades, not just selling.
David Meger, director of alternative investments and trading at High Ridge Futures, said:"The recent sharp rise in the gold and silver markets is due to the settlement of long positions and profit-taking after the recent gains, which has exacerbated the selling pressure."
Fawad Razaqzada, a market analyst at City Index and Forex.com, believes that the biggest impact on gold prices comes from the "sudden decline in various risk assets", as gold has continued to rise in recent years, and if risk assets suddenly plummet, investors may turn to the gold market to cash out.
Heavyweight U.S. PCE inflation data is coming.
Gold traders are currently awaiting the latest Personal Consumption Expenditure (PCE) price index, which is expected to trigger significant market volatility on Friday.
At 20:30 on Friday Beijing time, U.S. June personal consumption expenditure (PCE) price data will be released, which may reveal the Fed's interest rate path.
Authoritative media surveys show that the U.S. June PCE price index is expected to rise by 0.1% on a monthly basis, compared with no change in May. The U.S. June PCE price index is expected to increase by 2.5% on an annual basis, compared with a growth of 2.6% in May.
On a more crucial core data front, the survey shows that the U.S. June core PCE price index is expected to rise by 0.1% on a monthly basis, compared with a rise of 0.1% in May; the U.S. June core PCE price index is expected to climb 2.5% on an annual basis, up from a rise of 2.6%.
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.
OANDA Asia Pacific senior market analyst Kelvin Wong said that if PCE data shows inflation is slowing down, the Fed may cut interest rates in September, and then the gold price will rebound.
How to trade after the gold price plummeted?
FXStreet analyst Christian Borjon Valencia wrote that after closing below $2400/oz on Wednesday, gold prices further extended their decline on Thursday. As described by the Relative Strength Index (RSI) that has just fallen below the 50-neutral line, the short-term momentum is favorable for gold sellers.
Valencia said that therefore, gold prices may continue to decline. If the seller drags the gold price below the 50-day moving average (DMA) of $2359/oz, the next support level will be the low point of July 25, which is $2353/oz. Once it effectively falls below the above level, the gold price is expected to fall to the 100-day moving average of $2324/oz, and then to $2300/oz.
(Spot gold daily chart source: FXStreet)
Valencia added that on the contrary, gold buyers need to break through the psychological barrier of $2400/oz to test the historical high point of around $2483/oz.
Well-known financial information website Economies.com wrote on Thursday that the closing price of gold fell below $2366.10/oz, which supports the bearish trend of gold in the next few trading sessions. The next target of gold price is $2325.65/oz. On the other hand, if the gold price rebounds and breaks through $2366.10/oz, it will lead to an attempt to rebound.
(Spot gold 4-hour chart Source: Economies.com)
At 07:32 Beijing time, spot gold was reported at $2362.09/oz.