GOLD Analysis
Afternoon: Gold Prices Flat Amid Fed Rate Cut Speculations
Highlights:
- Gold stabilizes post-US economic data, Fed rate cut expectations.
- MCX gold consolidates, with resistance at 72,580-74,400 levels.
- Powell's testimonies crucial for Fed policy direction; inflation data awaited.
Executive Summary
Gold prices have stabilized following recent US economic data that bolstered expectations for Federal Reserve interest rate cuts. Federal Reserve Chair Jerome Powell indicated that while the US economy is on a "disinflationary path," further data is needed to determine the timing of rate cuts. Recent reports showing an increase in US job openings in May after consecutive months of decline have reinforced market expectations. Currently, there is a 65% probability of a Fed interest rate cut in September, with markets also pricing in another cut by December.
Market Overview
Global gold prices rebounded on Tuesday after a significant drop, as investors awaited Powell's congressional testimony and June inflation data for insights into the Fed's policy stance. On India's MCX (Multi Commodity Exchange), gold traded in a range-bound manner. Technically, MCX gold closed with a small bearish candle on the daily chart, signaling ongoing consolidation. Key resistance levels for MCX gold are identified at 72,580, 73,040, 73,520, 73,850, 74,000, and 74,400, while support levels are seen at 71,980, 71,240, 70,870, and 70,780. The short-term trend suggests consolidation, prompting traders to adopt a buy-on-dips strategy for potential short-term gains.
Federal Reserve Policy Outlook
Federal Reserve Chair Jerome Powell's upcoming testimonies before Congress and the release of June inflation data are pivotal events that will likely shape market sentiment and influence gold prices. Powell's comments and the inflation data will provide critical insights into the Fed's future monetary policy decisions. The current market sentiment leans towards expectations of rate cuts, driven by concerns over slowing economic growth and muted inflationary pressures.
Technical Analysis
Technical indicators suggest that MCX gold is consolidating within a defined range. The bearish candle on the daily chart indicates caution among traders, with potential downside risks supported by the identified levels. However, the buy-on-dips strategy remains viable as long as support levels hold, providing opportunities for traders to capitalize on short-term price movements.
Conclusion
In conclusion, the gold market continues to navigate through uncertainties surrounding US economic data and Federal Reserve policy expectations. Investors and traders alike are closely monitoring Jerome Powell's testimonies and inflation figures to gauge the timing and extent of potential rate cuts. While geopolitical tensions and global economic indicators contribute to market volatility, the technical outlook for gold suggests a consolidation phase with opportunities for tactical trading strategies.
Recommendations
- Short-term Traders: Consider adopting a buy-on-dips strategy with caution around identified support levels.
- Long-term Investors: Monitor Powell's testimonies and inflation data closely for insights into future gold price trends and potential market opportunities.
- Day Traders: Buy from support 2368 targetting 2383 which invalidates below support 2351
Support and Resistance Levels:
