GOLD Analysis
Afternoon: Gold Prices Steady Near Record Highs Amid Interest Rate Cut Predictions
Highlights:
- US Federal Reserve's Rate Cut: High confidence in a rate cut on September 18 with a 75.5% probability of a 25 basis point decrease and a 24.5% chance of a 50 basis point reduction.
- US Housing Market Decline: Decrease in single-family homebuilding in July due to higher mortgage rates and house prices, indicating slowing inflation.
- Economic Indicators: Solid retail sales, lower unemployment claims, and benign inflation data support the rate cut expectations and boost confidence in the US economy.
Overview:
Gold prices remained near the record high set in the previous session, driven by increased expectations of a US interest rate decrease next month. This prospect has significantly boosted bullion's attractiveness. Recent data indicated a decline in U.S. single-family homebuilding in July, as higher mortgage rates and house prices deterred potential buyers, suggesting a slowdown in inflation. Last week's robust retail sales figures, lower-than-expected unemployment claims, and benign inflation data bolstered confidence in the world's largest economy.
Traders are now highly confident that the US Federal Reserve will lower interest rates on September 18, focusing on the extent of the cut. According to the CME FedWatch tool, there is a 75.5% probability of a 25 basis point decrease and a 24.5% chance of a 50 basis point reduction.
Market Analysis:
US Housing Market: The decline in single-family homebuilding suggests that inflationary pressures are easing, which supports the case for a rate cut. Higher mortgage rates and elevated house prices continue to keep potential buyers at bay, indicating a cooling housing market.
Economic Indicators: Last week's solid retail sales data, combined with lower-than-expected unemployment claims and moderate inflation figures, have reinforced the notion that the US economy is stabilizing. This stability supports the likelihood of the Federal Reserve implementing a rate cut to sustain economic growth.
Key Economic Data:
CB Leading Index m/m (US Zone): This index, which tracks a range of economic indicators, will provide further insights into the health of the US economy and could influence the Federal Reserve's decision-making process.
Technical Levels:
Gold Prices (USD): Support is expected at $2470, with resistance at $2530.
Gold MCX Prices (INR): Support is expected at ₹71,000, with resistance at ₹71,800.
Conclusion:
Gold remains a highly attractive investment as the likelihood of a US interest rate cut increases. The decline in US single-family homebuilding and other economic indicators suggest a slowing inflation, providing further support for a potential rate reduction. Investors should closely monitor upcoming economic data, such as the CB Leading Index, for additional insights into the Federal Reserve's policy direction.
US Federal Reserve's Rate Cut: High confidence in a rate cut on September 18 with a 75.5% probability of a 25 basis point decrease and a 24.5% chance of a 50 basis point reduction.
US Housing Market Decline: Decrease in single-family homebuilding in July due to higher mortgage rates and house prices, indicating slowing inflation.
Support and Resistance Levels:
