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26/06/24
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Outlook on the Performance of Gold
In the early hours of June 26, gold prices were being pressured because of the USD’s strength and rising U.S. yields. Markets seemed cautious as they looked forward to the Fed’s preferred measure of inflation on Friday for more cues on potential rate cuts.
There has been some ease in geopolitical tensions since Monday, with discussions regarding a ceasefire between Israel and Hezbollah still unfruitful. This is partly why there was no buying pressure or safe haven appeal when the week started.
There will be no major economic data from the U.S. until Thursday, when the first quarter GDP data will be released and Friday when the personal consumption expenditure (PCE) price index will be released. Hence, volatility may be minimal. On Wednesday, U.S. home sales data will be released.
Gold is being limited by a lack of clarity regarding rate cuts. The precious metal records outflows when the Federal Reserve hikes interest rates based on an increase in the opportunity cost of holding onto it. Gold prices have increased significantly within the previous few months, so there may be some growth in bearish pressure.
The bulls may be somewhat convinced if the PCE index comes in lower than expected and gold prices may rise. Conversely, a somewhat increase in the index may prompt more uncertainty regarding rate cuts and put more bearish pressure on gold prices as market participants may decide to exit their positions in gold.
A look at gold’s chart shows the formation of higher lows and lower highs, suggesting that it may continue to trade within a range. Gold prices need to be pushed back above 2380 to prevent a sustainable break beneath 2300.
The chart shows that a trendline coincides with the barrier level at 2320. If gold breaks past the barrier level, there could be another visit to the barrier level at 2334. The psychological level of 2350 may be difficult to break if volatility is not significant.
On the other hand, the bears need to pull gold beneath 2310 to bring about another visit to 2300. It has been difficult for the bears to sustain gold beneath 2300 as the bulls continue to act whenever there is a brief fall beneath the level. This may continue if there is no fundamental catalyst to boost the precious metal’s performance.
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