Gold Price Sits Near Two-Week Peak, Lacks Follow-Through Amid Upbeat Market Mood -

Gold Price Sits Near Two-Week Peak, Lacks Follow-Through Amid Upbeat Market Mood

Jul 03, 2024Jeremy ParkinsonFinance, No picture0

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Gold price remains supported near a two-week high amid rising Fed rate cut bets.

Geopolitics, along with political uncertainty, also lends support to the XAU/USD.

A positive risk tone could cap further gains ahead of the US NFP report on Friday.

Gold price (XAU/USD) trades with a positive bias during the Asian session on Thursday and is currently placed just below a nearly two-week high touched the previous day. The underlying strong bullish sentiment across the global equity markets is seen acting as a headwind for the safe-haven precious metal amid relatively thin liquidity on the back of the Independence Day holiday in the US. Traders also seem reluctant and might prefer to wait for the release of the closely-watched US monthly employment details – popularly known as the Nonfarm Payrolls (NFP) report – on Friday before placing fresh directional bets. The near-term bias, meanwhile, seems tilted in favor of bullish traders amid growing acceptance that the Federal Reserve (Fed) will start cutting interest rates this year, which should continue to underpin the non-yielding Gold price. Against the backdrop of softer US macro data published on Wednesday, the minutes of the last FOMC meeting revealed that the majority of policymakers said the US economic growth is gradually cooling. This reaffirms bets that the Fed will lower borrowing costs in September and again in December, which keeps the US Dollar (USD) bulls on the defensive and lends some support to the precious metal. Apart from this, persistent geopolitical risks stemming from the ongoing conflicts in the Middle East and the protracted Russia-Ukraine war, along with political uncertainty in the US and Europe, validate the positive outlook for the Gold price. Moreover, the overnight breakout through the 50-day Simple Moving Average (SMA) suggests that the path of least resistance for the XAU/USD is to the upside.

Daily Digest Market Movers: Gold price continues to benefit from rising Fed rate cut bets

The incoming softer US macro data lifts market bets for an imminent start of the Federal Reserve’s rate-cutting cycle later this year, which continues to act as a tailwind for the non-yielding Gold price.

The Automatic Data Processing (ADP) reported on Wednesday that private-sector employment in the US rose 150,000 in June as compared to 157,000 in the previous month and expectations of 160,000.

Separately, the Labor Department said the number of Americans who applied for unemployment benefits rose further to a 2-1/2-year high last week, pointing to signs of easing labor market conditions.

Moreover, the Institute for Supply Management’s (ISM) Services PMI dropped in contraction territory and came in at 48.8 for June – marking its lowest level since May 2020 and missing consensus estimates.

The data further pointed to a loss of momentum in the economy at the end of the second quarter, reaffirming expectations that the Fed will lower borrowing costs in September and cut rates again in December.

Meanwhile, the minutes from the June 11-12 FOMC meeting revealed that the vast majority of policymakers assessed that the US economy seemed to be slowing and noted that price pressures were easing.

Officials, however, argued that additional favorable data was required to give them greater confidence that inflation was moving sustainably toward the 2% target and before reducing interest rates.

The US Treasury bond yields slumped for the second successive day on Wednesday and wiped out the Donald Trump and French election-fueled spike at the start of the week, undermining the US Dollar.

Investors now look forward to the release of the US Nonfarm Payrolls (NFP) report on Friday for cues about the Fed’s future policy decision, which will determine the near-term trajectory for the XAU/USD.

Technical Analysis: Gold price bulls await a move beyond $2,365 area before placing fresh bets
From a technical perspective, the overnight breakout through the 50-day Simple Moving Average (SMA), along with the fact that oscillators on the daily chart have again started gaining positive traction, favor bullish traders. Some follow-through buying and a sustained strength beyond the $2,365 area will reaffirm the constructive outlook, setting the stage for a move towards reclaiming the $2,400 mark. The Gold price might then extend the positive momentum and aim to challenge the all-time peak, around the $2,450 zone touched in May.On the flip side, any meaningful pullback now seems to attract fresh buyers near the 50-day SMA resistance breakpoint, around the $2,339-2,338 region. The next relevant support is pegged near the $2,319-2,318 area, which, if broken, could make the Gold price vulnerable to weaken further below the $2,300 mark and test the $2,285 horizontal zone. A convincing break below the latter will be seen as a fresh trigger for bearish traders and expose the 100-day SMA support, currently near the $2,258 area before the metal drops to the $2,225-2,220 region and the $2,200 round-figure mark.More By This Author:Australian Dollar Traded Strong On Wednesday, Focus Shifts To US Labor Market Data USD/CHF Holds Steady Around 0.9040 Area, Just Below Over One-Month Top Set On Tuesday WTI Price Analysis: Consolidates Above Mid-$82.00s, Bullish Potential Seems Intact