GOLD Analysis
Afternoon: Gold Market Update: Fed Rate Cut Expectations and Technical Analysis
Highlights:
- Gold prices near $2,375 amid anticipation of US CPI data, Fed rate cut likely in September.
- Global gold ETFs see inflows for the second consecutive month, driven by Europe and Asia.
- Key support at $2,352 and resistance at $2,400; buy on dips strategy recommended around $2,370.
Executive Summary
Gold prices advanced near $2,375 for the third consecutive session as investors eagerly awaited the release of US Consumer Price Index (CPI) data. This data is crucial for gauging the Federal Reserve's timing and extent of interest rate reductions. The annual CPI inflation rate for June is expected to decrease from 3.3% to 3.1%, while the core CPI is anticipated to remain steady at 3.4%. Federal Reserve Chair Jerome Powell reiterated the need for additional evidence before committing to rate cuts, emphasizing preparedness and confidence in the inflation forecast. Currently, the market is pricing in a 73% chance of a rate cut in September, with another cut projected in December. The World Gold Council reported that global gold ETFs experienced inflows for the second consecutive month in June, driven by gains in Europe- and Asia-listed funds.
Market Overview
Gold prices edged higher on Wednesday as investors awaited critical US CPI data to better understand the Federal Reserve's next move. A potential decrease in inflation rates could reinforce the case for a near-term rate cut by the Fed. The market's current expectation of a 73% chance for a September rate cut is pivotal in driving gold prices. Additionally, the World Gold Council's report of continued inflows into global gold ETFs indicates sustained investor interest in the yellow metal as a hedge against economic uncertainties.
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.
Key Economic Data
- US Core CPI m/m
- US CPI m/m
- US CPI y/y
- US Unemployment Claims
Technical Analysis
Gold prices are trading within a defined range, with key support and resistance levels:
- Support Levels: $2,352 (Gold$), ₹72,200 (Gold MCX)
- Resistance Levels: $2,400 (Gold$), ₹73,100 (Gold MCX)
The technical outlook suggests a buy-on-dips strategy for short-term gains
Action: Buying gold on drop till 2373 for immediate resistance 2383 followed by 2396 which invalidates below 2360
Conclusion
Gold's recent rally reflects investor anticipation of crucial US CPI data and Federal Reserve policy decisions. With a high likelihood of interest rate cuts in the near future, gold continues to be an attractive investment. Traders should consider the buy-on-dips strategy, focusing on the identified support and resistance levels for potential short-term gains.
Support and Resistance Levels:
