GOLD Analysis
Afternoon: Gold Prices Dip Amid Investor Caution Ahead of Key Inflation Data
Highlights:
- Gold prices slip to $2,320 as investors await key inflation data; annual PCE inflation rate forecasted to fall to 2.6%, core PCE to 2.6%.
- US economic data shows weakening with lower wholesale inventories, final GDP, and highest jobless claims since late 2021.
- Support at $2,295 and resistance at $2,348 for gold; trading strategy suggests buying on drop around $2,315, targeting $2,338 with stop loss below $2,302.
Introduction:
Silver prices have surged to a near two-week high, breaking above $30 per ounce. This recent uptick is fueled by a mix of weaker-than-expected U.S. economic data and growing speculations about potential interest rate cuts by the Federal Reserve. Furthermore, similar actions are anticipated from major central banks across Europe and the Asia Pacific region, contributing to the bullish sentiment in the silver market.
Factors Driving the Price Surge
U.S. Economic Data and Federal Reserve Policies
The rise in silver prices is significantly influenced by disappointing U.S. economic indicators. Weaker economic performance has led investors to bet on the Federal Reserve cutting interest rates to stimulate growth. Lower interest rates typically weaken the dollar, making precious metals like silver more attractive as an investment.
Overview
Gold prices have slipped to approximately $2,320, following a more than 1% increase in the previous session. This dip comes as investors exhibit caution ahead of significant inflation data releases, which are expected to provide insights into the Federal Reserve's policy stance for the remainder of the year.
Key Influences on Gold Prices
- Inflation Data Anticipation: The annual Personal Consumption Expenditures (PCE) inflation rate, the Federal Reserve's preferred inflation indicator, is forecast to fall from 2.7% to 2.6%, while the core PCE is expected to decrease from 2.8% to 2.6%.
- US Economic Data: Recent data indicated that the US economy is losing momentum. Wholesale inventories fell short of expectations, the final GDP figure was significantly lower, and jobless claims rose to their highest level since late 2021, suggesting a weakening labor market.
Upcoming Economic Data Releases
- Euro Zone: French Preliminary CPI (month-over-month) and Spanish Flash CPI (year-over-year).
- US Zone: Core PCE Price Index (month-over-month), Chicago PMI, and Revised University of Michigan (UoM) Consumer Sentiment.
Technical Analysis and Trading Strategy
Support and Resistance Levels:
- Gold (Spot): Support at $2,295 and resistance at $2,348.
- Gold MCX: Support at ₹71,000 and resistance at ₹72,000.
Action: Buy on a drop around $2,315, targeting $2,338, with a stop loss below $2,302.
Conclusion
Gold prices have retreated to around $2,320 as investors exercise caution ahead of crucial inflation data. The anticipated decline in the PCE inflation rate, combined with signs of a slowing US economy, will likely influence the Federal Reserve's policy decisions. Traders should monitor support and resistance levels and consider buying on dips around $2,315, targeting $2,338, with a stop loss below $2,302.
Support and Resistance Levels:
