Gold Price Forecast: Cautious Trade Ahead of US Holiday, Fed Meeting Minutes

Highlights

• Gold prices remained unchanged due to thin trading activity during a U.S. holiday.
• Traders eagerly awaited the release of the Fed’s meeting minutes for insights on interest rate hikes.
• Expectations of tighter monetary policy and elevated rates act as headwinds for gold.

Overview

Comex Gold prices remained unchanged on Tuesday, with thin trading activity due to a U.S. holiday. Traders eagerly awaited the release of the U.S. Federal Reserve’s minutes from the June meeting on Wednesday to gain insights into the future path of interest rate hikes.

The expectation of further tightening measures, liquidity withdrawal, and elevated rates for an extended period are currently acting as headwinds for gold. Investors anticipate a 25-basis-point hike in July, pushing rates to the 5.25%-5.50% range, before anticipating cuts after March 2024. The high interest rates discourage investment in non-yielding gold.

The dollar index, on the other hand, remained stable, providing little direction for gold prices. U.S. manufacturing data for June showed a further decline, reaching its lowest level since May 2020. However, price pressures have eased due to significant improvements in the supply chain and dampened demand caused by higher borrowing costs.

Gold Traders Await Fed’s Insights

Market participants will closely monitor the release of the minutes from the June 13-14 Federal Open Market Committee (FOMC) meeting on Wednesday for additional insights into the Fed’s stance. While there is a possibility of gold prices recovering to the range of $1,943 to $1,949 before potentially dropping lower, the prevailing rates environment continues to exert significant downward pressure on gold.

Short-Term Outlook:  Waiting for Guidance

In summary, gold prices remained flat during thin trading activity on Tuesday due to a U.S. holiday. The focus now shifts to the release of the Fed’s meeting minutes. It could provide further guidance on future interest rate hikes. The expectation of tighter monetary policy and elevated rates hampers the attractiveness of non-yielding gold. Additionally, the stability of the dollar index and subdued demand resulting from higher borrowing costs have influenced the market sentiment. Traders will closely watch for any indications in the minutes that could impact the direction of gold prices in the short term.

Technical Analysis

In the Comex Gold market, prices experienced a minor upward movement as the current 4-hour price of 1931.10 surpassed the previous close of 1929.30.

While the price remains below the 200-4H moving average at 1957.70, it is above the 50-4H moving average of 1926.50. The 14-4H RSI reading of 56.62 indicates a relatively neutral market sentiment.

The main support area is identified between 1889.50 and 1899.80, while the main resistance area is observed from 1943.20 to 1949.00.

Overall, the market sentiment for Comex Gold is relatively neutral, with traders closely monitoring price action for further direction.