Key Insights
- Gold price (XAU/USD) hovers uncertainly near $2,400 support level
- Speculation of Trump’s victory in US elections impacts Gold and USD
- Key US economic data this week could influence Fed rate cut expectations
Gold Fundamental Analysis
Gold finds itself at a critical juncture, hovering near the psychologically important $2,400 level as political uncertainty and economic anticipation dominate market sentiment. The precious metal’s recent price action reflects a complex interplay of factors, with the specter of a potential Trump presidency looming large over the markets.
Speculation surrounding Donald Trump’s chances in the upcoming U.S. presidential election has intensified following an assassination attempt and President Biden’s withdrawal from the race. This political shift has bolstered the U.S. Dollar, with the Dollar Index (DXY) rebounding from a four-month low to around 104.20. Trump’s campaign promises of corporate tax cuts and lower interest rates have fueled concerns about potential inflationary pressures, traditionally a bullish factor for gold.
However, the strength in the greenback is creating headwinds for gold, as the two often move inversely. Adding another layer of complexity, 10-year U.S. Treasury yields have dipped to 4.22%, which typically supports gold prices by reducing the opportunity cost of holding the non-yielding metal.
Market attention is now squarely focused on a slew of upcoming U.S. economic data releases. This week’s calendar is packed with high-impact events, including preliminary July PMIs, Q2 GDP figures, Durable Goods Orders, and the Fed’s preferred inflation gauge, the PCE Price Index. These releases will be crucial in shaping expectations for the Federal Reserve’s next move, with markets currently pricing in a strong possibility of rate cuts beginning in September.
The Fed’s recent confidence in the disinflationary trend, bolstered by June’s softer-than-expected inflation readings, has kept the door open for potential rate cuts. However, the strength of upcoming data, particularly the core PCE inflation figure (expected to show a slight uptick to 0.2% month-on-month), could shift this narrative.
XAUUSD Technical Analysis
From a technical perspective, gold’s price action suggests a market at a crossroads. The precious metal is currently testing the 20-day Exponential Moving Average (EMA) around $2,390, a key level that, if held, could maintain the near-term bullish outlook. The advancing trendline from the February 14 low at $1,984.30 provides additional support for gold bulls.
The 14-day Relative Strength Index (RSI) has retreated into the 40.00-60.00 range, indicating a pause in upward momentum but not yet signaling a bearish reversal. For the rally to resume in earnest, gold would need to break above the recent all-time high of $2,480.
