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Home » News » Gold Price Retreats beneath $2,400 as Traders Await US Data

Gold Price Retreats beneath $2,400 as Traders Await US Data

by | Jul 26, 2024

Gold prices hit a new record high

Key Takeaways

  • Gold’s recent peak at $2,432 was tempered by rising US Treasury yields, stabilizing prices below $2,400.
  • A 25 basis point rate cut by the Federal Reserve in September is widely anticipated, supporting gold prices.
  • India’s reduction in import taxes on precious metals from 15% to 6% has boosted demand.
  • Economic indicators, such as the US GDP growth and PMI reports, play a significant role in gold’s price movement.
  • Technical analysis suggests that gold needs to surpass resistance levels for a bullish continuation, while key support levels could signal further corrections if breached.

Gold recently reached a high of $2,432 before stabilizing below $2,400, influenced by the 10-year US Treasury yield rising to 4.274%. The CME FedWatch Tool predicts a 100% chance of a 25 basis point rate cut by the Federal Reserve in September, supporting gold prices. Additionally, India’s decision to reduce import taxes on precious metals has increased demand.

Late in the North American session, gold prices remained stable below $2,400 after peaking at $2,432. Increased risk aversion and rising US Treasury bond yields have limited the rally of gold, a non-yielding asset that tends to decline when investors prefer US Treasuries.

Bullion traders increased spot prices as US Treasury yields fell ahead of a five-year note sale. However, after the auction, the 10-year Treasury note yield rose by two basis points to 4.274%, posing a challenge for gold prices. Meanwhile, the US Dollar Index (DXY) fell slightly by 0.08% to 104.38, but losses were limited.

The risk-off sentiment allowed gold prices to rise to a three-day high, with traders fully pricing in a 25 basis point rate cut by the Federal Reserve in September. The CME FedWatch Tool indicates a 100% chance of this cut, while the Chicago Board of Trade data predicts 53 basis points of easing in 2024.

Economic data showed that the US Goods Trade Balance for July had a narrower deficit than expected. The Purchasing Managers Index (PMI) report by S&P revealed mixed business activity, with manufacturing contracting for the first time since December 2023.

India’s decision to reduce import taxes on precious metals from 15% to 6% also boosted the prices of precious metals.

Traders are now awaiting the first reading of the US Gross Domestic Product (GDP) for Q2 2024, to be released on Thursday, followed by the Personal Consumption Expenditure (PCE) Price Index figures for June, the Federal Reserve’s preferred measure of inflation.

Market Movers: Gold Prices Remain Steady Around $2,400

  • S&P Global reported that the Services and Composite PMIs for July exceeded expectations, coming in at 56 and 55, respectively.
  • The S&P Global Manufacturing PMI fell from 51.6 to 49.5, missing the consensus of 51.7.
  • The US Goods Trade Balance for June was -$96.0 billion, better than the expected -$98.0 billion and May’s -$99.4 billion.
  • The GDP for Q2 is projected to rise from 1.4% in Q1 2024 to 1.9% quarter-over-quarter, indicating economic acceleration.
  • The Core PCE, the Fed’s preferred measure of inflation, is expected to decrease from 2.6% to 2.5% year-over-year.

Technical Analysis: Gold Price Movements

Gold prices hit a three-day peak above $2,430 after forming a ‘bullish harami’ but fell below the July 23 high of $2,412, indicating weak buying momentum. A daily close below this level could lead to more selling pressure, with US data driving price action on Thursday and Friday.

The Relative Strength Index (RSI) is bullish but has leveled off, showing indecision among buyers and sellers.

For a bullish continuation, XAU/USD needs to surpass Wednesday’s peak of $2,430. The next resistance levels would be $2,450 and the all-time high of $2,483, followed by the $2,500 mark.

On the downside, if XAU/USD falls below the July 22 low of $2,384, a deeper correction is possible. The next support level would be the 50-day Simple Moving Average (SMA) at $2,359. Further losses could occur if sellers break through the 100-day SMA at $2,315, potentially driving the price toward $2,300.

Conclusion

Gold prices have recently experienced fluctuations due to a mix of economic indicators and market sentiments. Despite reaching a high of $2,432, gold stabilized below $2,400 as US Treasury yields rose, presenting a challenge for the non-yielding asset. The anticipation of a 25 basis point rate cut by the Federal Reserve in September has supported gold prices, along with India’s reduction of import taxes on precious metals. However, the interplay of US economic data, such as the GDP growth projections and the PMI reports, continues to influence market dynamics. Traders remain cautious, awaiting key economic releases that could further impact gold prices.

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Gold Plummets Almost Three Percent After Trump Wins Election

by | November 7, 2024 |

Gold prices took a notable hit this week, sliding nearly three percent after the U.S. presidential election concluded with Donald Trump as the projected winner. Investors quickly moved capital into assets like the U.S. Dollar, stocks, and Bitcoin, reducing gold's appeal as a safe haven. As of Wednesday, the XAU/USD rate dropped to the $2,660s range, largely due to the strengthening dollar following Trump’s victory. With Trump securing 277 electoral votes to Vice President Kamala Harris’s 224, market sentiment suggests his economic policies could boost the U.S. dollar. Strength in the dollar typically pressures gold prices since gold is priced in dollars and tends to become more expensive for holders of other currencies. In addition to the dollar’s rise, capital is shifting from traditional safe-haven assets like gold toward riskier investments, including Bitcoin and equities. Trump’s assertions that he can negotiate peace in regions like the Middle East and Ukraine, though optimistic, may also contribute to the decreased demand for safe-haven assets.

Dollar and Stocks Rally While Gold Loses Favor

The markets seem to be responding positively to Trump's anticipated economic agenda, with the U.S. Dollar Index (DXY) climbing by more than 1.3%, reaching a peak of 105.32 on Wednesday. Stock futures also reacted with gains, with S&P 500 futures rising 2.2% to 5,909, and Dow 30 futures climbing over 1.3% to 42,770 in pre-market trading. The promise of potential tax cuts and economic growth has added to this market enthusiasm. Cryptocurrencies like Bitcoin have also surged, with Bitcoin reaching a record high of $75,407 amid expectations of a favorable regulatory environment under Trump’s administration.

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Long-Term Outlook for Gold

Despite the recent drop, gold’s long-term bullish outlook remains intact, and it may regain strength in the future if economic conditions shift. For now, though, the focus appears to be on assets expected to benefit directly from Trump’s economic policies.

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