Gold Price to React on Fed Testimony and CPI Data in spotlight!

Gold price had a neutral trade on Tuesday, as focus shirted on key U.S. inflation data and Fed testimony that could shed more light on the Federal Reserve’s interest rates trajectory.

Testifying before the Senate Monetary Policy Banking Committee, Powell offered entertaining headlines that helped the US dollar. He said, among other things, that the restrictive policy will help reduce inflationary pressures, but added that inflation is still above the 2 percent target.

In addition, he said, policymakers are not confident enough that higher inflation will slow and that they need more confidence to abandon tight monetary policy. Finally, he explained that decisions are made in meetings.

Around 75% of the market has positioned for the central bank to commence lowering interest rates in September before delivering another cut this year.

In the meantime, bullion assets were also pressured by a lesser extent of safety demand amid a revival of hopes of a ceasefire between Israel and Hamas.

Powell commentary lifted some gains to the US Dollar but did not weigh too heavily on Gold despite promising higher interest rates for longer. Gold tends not to perform so well when interest rates are expected to remain elevated as it raises the opportunity cost of holding the precious metal.

Apart from that, Gold weakness at the start of the week came after the news that the People’s Bank of China (PBoC), one of the largest consumers of Gold in the world, had not bought any Gold for the second month in a row in June, after 18 consecutive months of reserve-building, according to data from the PBoC.

 Further, political risk from an increased chance that former President Donald Trump will win the US presidential election in November, also weighting on a sentiment.

If Trump wins the presidency, he is expected to cut taxes and borrow, leading to a worsening fiscal position for the US. Critics say his fiscal profligacy will lead to higher inflation, which in turn will keep interest rates high. Gold is falling because it is a non-interest-bearing asset that becomes less attractive to investors when interest rates are high. 

Technical Outlook : Gold Price

The gold price retreated from the day’s high of 72634 to 72400 compared to the previous day’s 72333.00

However, the price remained trading above the short-term moving average as well as its short-term consolidation support level. In the near term, the movement is expected to remain indecisive and prices will fluctuate between 71880-73100.00.

A break above 73100 opens the door to the next resistance at 73500-73850-74000. On the downside, a break below 73100 will extend the losses towards 72800-72500.0

Happy Trading!

Commodity Samachar
Learn and Trade with Ease

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