Spot Gold: Dovish rate bets bring retest of upper consolidation range
Gold prices have been stuck in a broad consolidation range since April this year, but has seen renewed signs of life lately as dovish Federal Reserve (Fed) bets continue to mount. The case for a September Fed rate cut has been built around softer US growth conditions, alongside promising inflation progress, which will likely see the Fed open the door to upcoming rate cuts at the July meeting.
Of course, the last hurdle to watch will be the US Personal Consumption Expenditures (PCE) price data release on 26 July, but it seems that it will have to take a huge surprise to significantly overturn the prevailing data trend thus far. While China’s gold purchases have come to a halt in May and June, ongoing geopolitical tensions, lower Treasury yields and a weaker US dollar remain as positive catalysts to drive inflows for the yellow metal.
On the technical front, gold prices seem to be looking for a retest of the upper consolidation range at the US$2,430 level. Buyers have been regaining some control for now, with its daily moving average convergence/divergence (MACD) crossing back into positive territory while its daily relative strength index (RSI) has overcome a downward trendline.
A breakout above US$2,430 could leave sight on the US$2,600 level next. On the other hand, if prices failed to break out of its current consolidation phase, we could see prices drift lower towards the US$2,350 level, where its July low stands alongside its daily Ichimoku Cloud zone.