On Thursday, July 25th, spot gold fell by 1.8% to $2,355.22 per ounce, reaching its lowest level since July 9th. That day, U.S. economic data triggered profit-taking in gold, causing a sharp pullback in prices. Traders are waiting for Friday's release of U.S. PCE data to better understand when the Federal Reserve will cut interest rates.
On Thursday, U.S. economic data showed that U.S. GDP annualized growth rate for Q2 was 2.8%, with economists surveyed by Reuters predicting 2.0%. After excluding the volatile food and energy components, core PCE consumer spending index grew 2.9% in Q2, down from 3.7% in Q1. In the week ending July 20th, initial state unemployment claims fell 0.01 million, seasonally adjusted to 0.235 million. Economists surveyed by Reuters expect the number of applicants in the latest week to reach 0.238 million. However, the only flaw was in the U.S. Durable Goods Report, which showed that due to a decline in transportation orders, durable goods orders fell 6.6% in June, while the expected increase was 0.3%. The latest data should boost confidence in the rare "soft landing" of the U.S. economy, that is, the high interest rates set by the Federal Reserve can control inflation without causing the economy to recession. Federal Reserve officials have made it clear that they are ready to start cutting interest rates soon as inflation approaches their target of 2%, which is also the measure that people widely expect them to take in September. However, due to gold's large gains, investors may use this mixed data from Thursday to make some profit adjustments, thus exacerbating the selling pressure on gold. However, Sucden Financial commodity analysts predict that the price rise is only a matter of time. They expect gold prices to break through $2,500/ounce by the end of Q3. Analysts said in a quarterly outlook that "with strong physical demand, central bank acquisitions, slower inflation and increased market volatility, the outlook for gold is still optimistic." Analysts said the biggest factor supporting precious metals prices in the short term remains the firm expectation of a Fed interest rate cut in September. Therefore, traders are currently waiting for Friday's release of U.S. PCE data - the inflation indicator preferred by the Federal Reserve. If the data shows that inflation is falling further, it may spur investors to continue their interest in long gold positions. But if the data meets or beats expectations, gold prices will face further downside risk.
Source: E-huitong
Technically, after closing below $2,400/ounce on Wednesday, gold price further expanded its decline on Thursday. Currently, the gold price has fallen below the midline of the daily Bollinger Bands channel, with short-term momentum favoring gold bears. If the bears drag the gold price below the 50-day moving average (DMA) of $2,359/ounce, the next support level will be the low point of July 25th, which is $2,353/ounce. Once it breaks down this level, the gold price is expected to drop to the 100-day moving average of $2,324/ounce and then to $2,300/ounce. On the other hand, gold buyers need to break through the psychological resistance level of $2,400/ounce to have a chance to test the historical high point around $2,483/ounce.
Wang Gang, Bank of China Guangdong Branch
For personal views only, not representative of the views of the organization.