Gold Price Forecast: Struggling Near 3-Month Low Amid Strong US Economy, Rate Hike Anticipation

Highlights

• Gold prices near three-month lows due to robust US economic data.
• Investors anticipate rate hikes and monitor Powell’s speech for insights.
• Fed’s upcoming meetings and PCE data will impact gold’s trajectory.

Overview

Gold futures prices are hovering near three-month lows as robust US economic data counters its traditional safe-haven appeal. Traders are eagerly awaiting Federal Reserve Chair Jerome Powell’s speech and additional data for insights into potential rate hikes. The dollar strengthened due to strong economic data, pushing gold towards its June-low overnight. Technical factors and profit-taking by bears are also driving the precious metal’s recent movements.

Rate Hike Anticipation Dampening Demand

Tuesday’s data indicating a resilient economy could signal the need for further Fed rate hikes to combat inflation. According to CME’s Fedwatch tool, investors currently anticipate a 77% chance of a rate hike in July, with potential rate cuts projected from March 2024 onwards. Major US banks also expect a 25-basis-point rate hike. The prospect of higher interest rates dampens investor interest in non-yielding gold, contributing to its recent decline.

Market Awaits Key Economic Indicators

The Federal Reserve’s upcoming release of minutes from its June 13-14 meeting on July 5 and the Federal Open Market Committee (FOMC) meeting on interest rates scheduled for July 25-26 will be closely monitored by market participants. Additionally, investors will keenly observe the personal consumption expenditure (PCE) price index data for May, among other indicators, which will be published on Thursday and Friday.

Inflationary Pressures, Fed’s Stance Impacting Gold Outlook

History suggests that gold’s movement following the PCE data may be subdued unless there are significant fluctuations in the consumer price index (CPI). Given the persistent inflationary pressures, the Fed may maintain a hawkish stance to curb inflation, as it currently exceeds the central bank’s 2% target. Powell’s speech at the European Central Bank (ECB) Forum on Central Banking in Sintra, where he will join other central bank members, adds to the market’s anticipation.

Faces Crucial Test of Psychological Level

Looking ahead, if macroeconomic indicators continue to support further monetary policy tightening, gold could face a crucial test of the psychological level at $1,900. Traders and investors will closely monitor developments in US economic data, Powell’s remarks, and the central bank’s actions to gauge gold’s potential trajectory.

Short-Term Outlook:  Bearish

In conclusion, gold’s safe-haven appeal is being offset by strong US economic data, leading to its proximity to three-month lows. The anticipation of rate hikes and the dollar’s strength have dampened investor interest in the precious metal. Powell’s speech, upcoming data releases, and the Fed’s monetary policy decisions will provide crucial insights into gold’s future direction.

Technical Analysis

Comex Gold is currently exhibiting bearish sentiment. The price of gold is slightly lower than the previous close, and it is trading below both the 200-4H and 50-4H moving averages, indicating potential downward pressure. The 14-4H RSI is below the neutral level, further suggesting a bearish sentiment.

However, there is some support within the main support area at 1919.50 to 1924.70 . It is important to closely monitor the market for any potential shifts in sentiment or price movements. Overall, the market is currently leaning towards a bearish outlook for Comex Gold.