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Gold Price On the Way Up After US Inflation Cools

Gold price rose for the third consecutive day on Thursday trading at $2,383 in the spot market after gaining 0.5 percent in the intraday session. Gold has had a good run in July, gaining 2.3 percent against the dollar as the greenback reels from perceived impending rate cuts by the Fed.  The yellow metal has also gained from the geopolitical pressure in the Middle East, which have increased this week.

The US dollar has lost its lustre in recent days, on the back of dovish comments by Fed Chairman Jerome Powell. In addition, the unemployment rate rose to two-year highs in June, strengthening the selling pressure on the dollar. Competition from US treasury bonds have also fallen in recent days, providing propulsion to the precious metal.  As of this writing, yields on the benchmark 10-year bonds have fallen to 4.291 percent.

Gold’s geopolitical premium rose this week after Israel upped the tempo on its offensive in Gaza. In the latest development, Israel dropped leaflets in Gaza City, telling residents to evacuate and head to Central Gaza.

In the latest development, US Consumer Price Index (CPI) declined more than expected in June, raising prospects of a first rate cut in September. Monthly core inflation came in at 0.1 percent, below the forecast 0.2 percent. The annualized equivalent also declined to 3.3 percent, below forecasts that had expected the figure to remain unchanged at 3.4 percent. Similarly, headline inflation declined month-over-month to minus 0.1 percent, against a forecast figure of 0.1 percent. The figure stood at 3 percent YoY, declining from May’s 3.3 percent and lower than the forecast 3.1 percent.

Meanwhile, the Initial Jobs Claims figures declined more than expected to 222,000, against a forecast figure of 236,000. While this signaled signs of improving labour market conditions, traders will likely ignore the figures and align themselves with the CPI figures.

Technical analysis

The momentum on gold price signals a likely continuation of the upside if the price stays above 2,400. With the buyers in control, the XAUUSD pair could encounter the first resistance at 2,410. A move past that mark will strengthen the upward momentum and potentially move gold price to 2,420. Alternatively, a move below the pivot mark will favour the sellers to take control. The first support will likely come at 2,390, but extended control by the sellers could break that support, invalidate the upside view and possibly push the price to test 2,380.