GOLD Analysis
Afternoon: Gold rose above 2360, will it sustain or drop back?
Highlights:
- Gold prices surge past $2,360 as US economic data supports rate cut expectations.
- US private payroll growth lags, with ADP data showing fewer-than-expected additions in May.
- Central banks' rate decisions: Bank of Canada cuts rates, ECB expected to follow suit.
Introduction:
In recent trading sessions, gold prices have climbed beyond $2,360, buoyed by economic indicators that suggest the Federal Reserve may have the flexibility to lower interest rates this year. The ADP report highlighted a weaker-than-expected increase in US private payrolls for May, with a downward revision for April's figures. This points to a robust yet underwhelming labor market.
Key Economic Indicators and Central Bank Actions
The ADP employment data showed a modest increase in private payrolls for May, falling short of expectations. Additionally, April's figures were revised downwards, contributing to the sentiment that the labor market, while solid, is not as strong as previously believed. This has bolstered market speculation about potential interest rate cuts by the Federal Reserve.
The CME FedWatch Tool now indicates that market participants expect the Fed to reduce interest rates twice before the end of the year. The probability of a rate cut as early as September has been priced at 70%.
In a related development, the Bank of Canada reduced its benchmark policy rate on Wednesday, marking its first cut in four years. The European Central Bank (ECB) is also anticipated to announce a rate cut later today, signaling a trend among central banks towards more accommodative monetary policies.
Upcoming Economic Data Releases
Several significant economic reports are due for release shortly, which could further influence market expectations and gold prices:
- German Factory Orders (m/m)
- ECB Policy Rate Meeting
- US Unemployment Claims
- Revised US Nonfarm Productivity (q/q)
Technical Analysis: Support and Resistance Levels
In terms of technical analysis, gold prices are expected to find support at $2,340 and face resistance around $2,400. Similarly, Gold MCX prices are anticipated to have support at ₹72,000 and resistance at ₹73,000.
Trading Strategy
For traders, the recommended action is to buy on dips around $2,351, with a target of $2,373. It is advisable to implement a stop-loss below $2,335 to manage potential downside risks.
Conclusion
The interplay between economic data and central bank policies continues to shape the outlook for gold prices. With the market leaning towards the possibility of rate cuts, gold remains an attractive asset. Investors should stay informed of upcoming economic releases and central bank decisions, which could significantly impact the market dynamics.
Support and Resistance Levels:
