25 July
Gold and silver market
During the Asian session on Tuesday, Spot Gold prices experienced a positive uptick, breaking a four-day losing streak and rebounding from a one-week low set in the previous session. Currently trading around $1,960, the XAU/USD pair has gained 0.25% for the day as traders eagerly await key central bank events scheduled for this week. However, amidst looming recession risks, escalating tensions between the US and China, and geopolitical uncertainties, market optimism remains subdued. The disappointing Purchasing Managers’ Index (PMI) prints for July in major economies have further fueled concerns of a global economic downturn, leading investors to seek safety in Gold.
Factors Influencing Gold Price:
The primary focus of investors is on the upcoming central bank events, as they seek clues about the future rate-hike path, which will significantly impact the dynamics of the USD and, consequently, influence the direction of Gold prices. Speculation surrounds whether the Federal Reserve will adopt a more dovish policy stance or adhere to its forecast of a 50 bps rate hike by the year’s end. The uncertainty surrounding the Fed’s decision has contributed to the recent strong recovery of the USD from its lowest level since April 2022, potentially limiting substantial gains for XAU/USD.
Aside from the Fed decision, this week is packed with crucial US macro data releases, including the Advance Q2 GDP report and the Core PCE Price Index, which is the Fed’s preferred inflation gauge. Investors are also closely monitoring the European Central Bank (ECB) meeting on Thursday and the Bank of Japan (BoJ) monetary policy update on Friday. These events will play a crucial role in shaping the short-term trajectory of Gold prices, especially considering the metal’s status as a non-yielding asset.
Technical Analysis and Key Levels:
From a technical standpoint, Gold faces resistance around the 100-day Simple Moving Average (SMA) at approximately $1,962. If this level is surpassed, further resistance lies at the $1,977-$1,978 zone and the monthly peak at $1,987-$1,988, with a potential target of reaching the psychological $2,000 mark. A breakthrough beyond this level may drive the price towards the $2,010-$2,012 supply zone.
On the downside, the weekly low around $1,953 acts as immediate support, followed by the $1,946-$1,945 region. A sustained decline may signal the end of the recent upward trend observed since the beginning of the month and pave the way for deeper losses. The Gold price could then aim for the $1,934 horizontal support, eventually targeting the $1,926-$1,925 region. A breach of this level may push the XAU/USD pair lower towards the $1,909 area, and if the decline continues, the $1,900 mark may be tested, with potential support around the multi-month low of $1,893-$1,892 reached in June.
Conclusion:
The Gold price has rebounded from recent lows, buoyed by concerns over the global economic outlook and geopolitical risks. However, the upcoming central bank events and crucial economic data releases are likely to drive further price movements. Traders should exercise caution and wait for additional buying momentum before positioning for potential gains in the XAU/USD pair.
– Nitin Kedia
