Gold Price Sustains Gains Above Key Support Level

Summary:
• Gold price is likely to sustain the gains made recently, with a stay above $2,400 in the spot market likely following soft US inflation data.

Gold price was relatively flat on Monday as the US dollar mounted a fightback propelled by geopolitical events that took place over the weekend. As of this writing, spot gold traded at $2,413 per ounce in the intraday session, up by 0.1 percent, while futures gold was relatively unchanged at $2,420.  At its current price, gold is near nine-week highs, with the dollar under pressure from expected Fed interest rate cuts. A stay above the $2,400 psychological support will be critical to sustaining further gains by gold.

The yellow metal stayed on the ascending trajectory last week, with the momentum sustained by the lower-than-expected June US Consumer Price Index (CPI) figures. That all but cemented the likelihood that the Federal Reserve will start exiting the 5.25-5.50% interest rate from September. As of this writing, the CME FedWatch tool shows that 93 percent of investors expect the first 25 basis point slash. 

Fed Chairman Jerome Powell will speak to Bloomberg later on Monday, and he is likely to be less reserved this time around, compared to his approach during last week’s Congressional testimony, which happened before the CPI release.  Therefore, his speech will likely inject fresh volatility into XAUSD as the market awaits Tuesday’s release of US Core Retail Sales data.

Meanwhile, the shooting of Donald Trump over the weekend is likely to have tilted the scales in favour of the US dollar, as analysts believe that it raises the prospects of his election win. With that, safe haven gold will likely be less attractive, as Trump’s economic policies are expected to result in lower corporate taxes and looser regulation. These could boost equities and increase the pressure on gold.

Technical analysis

Gold prices will likely head up if the XAUUSD pair stays above the pivot mark at 2,420 mark. That could see the pair encounter the first resistance at 2,425, but extended control by the sellers could propel further gains to test 2,430. Alternatively, a move below 2,420 will favour the seller to take control, and the downside will likely find the first support at 2,415. A break below that mark will strengthen the downside momentum and invalidate the upside narrative. Also, it could result in extended losses to test 2,410.