- Summary:
- With up to 3 rate cuts possible, gold price looks set to return to the upside despite China's decision to pause purchases again in July.
Gold price snapped a four-session losing streak on Wednesday, edging up by 0.4 percent to trade at $2,401 per ounce in the spot market. A return above the $2,400 psychological mark signals that profit-taking could have taken a backseat and could be weighing the implications of the expected Federal Reserve interest rate cuts. With potentially as many as three rate cuts between September and December, gold’s lustre just got brighter against the yield-bearing US government bonds, despite signs of bounce-back by the latter. Gold futures price was at $2,439 at press time, aligning with the market sentiment surrounding the expected level of rate cuts.
However, near-term gains by gold will encounter two key headwinds. First, China’s central bank kept off the gold market for the third straight month in July, denting the commodity’s demand-side price gains. Also, benchmark 10-year US government bonds tested the 4 percent yield level earlier on Wednesday, which could limit gains by gold. That said, Middle East tension remains in focus, and could bring new impetus into the market.
Momentum indicators
The 2-hour chart signals that gold price is on an upward momentum. The price has just crossed above the Volume Weighted Moving Average (VWMA), which currently stands at $2,397. Therefore, the upside will likely continue if the price stays above that mark. Also, the %K Stochastic line is above the %D line, with the reading at 68 affirming control by the buyers.
Support and resistance levels
Gold price will likely stay on the upward trajectory if the price action stays above the 2,395.05 mark. That could see the first resistance encountered at 2,405.10, but extended control by the buyers could break above that mark to test 2,412.35. Alternatively, a move below 2,395.05 will favour the sellers to take control. If that happens, the downside could find the first support at 2,388.17, but extended control by the sellers could breach that mark, invalidating the upside narrative and potentially testing 2,380.00
