Gold shines as US yields tumble ahead of US inflation report


content provided with permission by FXStreet


  • Gold
    surges
    amid
    growing
    expectations
    of
    Fed
    rate
    cuts
    in
    September.

  • US
    10-year
    Treasury
    yield
    drops
    to
    4.288%,
    while
    US
    Dollar
    Index
    falls
    below
    105.00.

  • Inflows
    into
    Gold
    ETFs
    support
    the
    metal,
    with
    eyes
    now
    on
    US
    June
    inflation
    data
    and
    economic
    indicators.

Gold
price
escalated
on
Wednesday
for
back-to-back
days
amid
growing
speculation
that
the

Federal
Reserve

(Fed)
could
begin
to
slash
higher
interest
rates
at
the
September
meeting.
Consequently,
US
Treasury
bond
yields
and
the
Greenback
fell,
a
tailwind
for
the
golden
metal.
The
XAU/USD
trades
at
$2,372,
up
by
more
than
0.30%.

Falling
US
Treasury
bond
yields
and
a
soft
US
Dollar
bolstered
the
non-yielding
metal.
The
US
10-year
benchmark
note
coupon
dropped
one-and-a-half
basis
points
(bps)
to
4.288%,
while
the
US
Dollar
Index
(DXY)
trended
below
the
105.00
mark,
losing
0.06%.

In
his
appearance
at
the
US
House
of
Representatives,
Fed
Chair
Jerome
Powell
repeated
most
of
his
remarks
revealed
at
a
US
Senate
committee
on
Tuesday.
He
acknowledged
the
progress
on
inflation,
yet
Powell
stated
the
board
is
not
confident
that
lowering
rates
will
help
prices
reach
the
2%
goal.

Despite
ongoing
pullbacks,
Gold
remains
underpinned
by
a
second
consecutive
month
of
inflows
into
Gold
exchange-traded
funds
(EFTs)
in
June,
driven
by
additions
to
holdings
by
Europe
and
Asia-listed
funds.

With
Fed
Chair
Powell’s
semi-annual
testimony
in
the
rearview
mirror,
investors
eye
the
release
of
US
June
inflation
figures
on
Thursday.
That,
Initial
Jobless
Claims
and
the
University
of
Michigan
Consumer
Sentiment
data
will
set
Gold’s
direction.

Daily
digest
market
movers:
Gold
price
escalates
on
Fed
rate
cut
hopes

  • US
    CPI
    is
    expected
    to
    decrease
    from
    3.3%
    to
    3.1%
    annually
    in
    June,
    while
    core
    inflation
    is
    projected
    to
    remain
    steady
    at
    3.4%
    YoY.
  • According
    to
    the
    consensus,
    Initial
    Jobless
    Claims
    for
    the
    week
    ending
    July
    6
    are
    expected
    to
    increase
    from
    238K
    to
    240K.
  • July
    Consumer
    Sentiment
    is
    forecast
    to
    improve
    to
    68.5,
    up
    from
    68.2
    in
    June,
    according
    to
    the
    consensus.
  • Bullion
    prices
    retreated
    somewhat
    due
    to
    the
    People’s
    Bank
    of
    China’s
    (PBoC)
    decision
    to
    halt
    Gold
    purchases
    in
    June
    as
    it
    did
    in
    May.
    China
    held
    72.80
    million
    troy
    ounces
    of
    the
    precious
    metal
    at
    the
    end
    of
    June.
  • According
    to
    data
    from
    the
    CME
    FedWatch
    Tool,
    investors
    are
    pricing
    in
    71%
    odds
    of
    a
    Fed
    rate
    cut
    in
    September,
    up
    from
    70%
    on
    Tuesday.
  • December
    2024
    fed
    funds
    rate
    futures
    contract
    implies
    that
    the
    Fed
    will
    ease
    policy
    by
    39
    basis
    points
    (bps)
    toward
    the
    end
    of
    the
    year.

Technical
analysis:
Gold
price
consolidates
around
$2,370

Despite
forming
a
bearish
Harami

candlestick

pattern
after
breaching
the
Head-and-Shoulders
neckline,
Gold
has
resumed
its
ongoing
uptrend
yet
remains
shy
of
hitting
weekly
highs
set
on
Monday
at
$2,391
a
troy
ounce.

Momentum
shifted
in
favor
of
buyers
as
shown
by
the
Relative
Strength
Index
(RSI),
which
remains
bullish
above
the
50-neutral
line
and
aims
upward.

Hence,
the
path
of
least
resistance
is
to
the
upside.
The
XAU/USD
first
resistance
would
be
the
July
5
high
at
$2,392,
followed
by
the
$2,400
figure.
A
further
upside
is
seen,
with
the
next
resistance
lying
at
the
year-to-date
high
of
$2,450,
ahead
of
the
$2,500
mark.

Conversely,
if

XAU/USD

slumps
below
$2,350,
the
golden
metal
might
decline
to
the
$2,300
level.
If
this
support
fails,
the
next
demand
zone
would
be
the
May
3
low
of
$2,277,
followed
by
the
March
21
high
of
$2,222.


Economic
Indicator

Consumer
Price
Index
(YoY)

Inflationary
or
deflationary
tendencies
are
measured
by
periodically
summing
the
prices
of
a
basket
of
representative
goods
and
services
and
presenting
the
data
as
The
Consumer
Price
Index
(CPI).
CPI
data
is
compiled
on
a
monthly
basis
and
released
by
the

US
Department
of
Labor
Statistics
.
The
YoY
reading
compares
the
prices
of
goods
in
the
reference
month
to
the
same
month
a
year
earlier.The
CPI
is
a
key
indicator
to
measure
inflation
and
changes
in
purchasing
trends.
Generally
speaking,
a
high
reading
is
seen
as
bullish
for
the
US
Dollar
(USD),
while
a
low
reading
is
seen
as
bearish.



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