Retail Sales showed a slowdown in the US economy, according to Tuesday’s data. After that, gold prices advanced towards $1,980. In this move, the yellow metal gained more than 1%. Yields on US Treasury bonds fell overall, supporting the price of the yellow metal. Economists and analysts share their views on gold’s route.
Gold prices will move towards $ 2,100!
The focus is now shifting to next week’s Fed decision, with markets pricing in an almost 25 bps increase. Soft inflation and weak Retail Sales changed the perspective of investors. They now refrain from betting on an additional raise after July. Market participants will watch the Fed’s statement for clues on forward direction. He will also closely follow the speeches of Fed Chairman Jerome Powell.
Meanwhile, market expectations that the Fed’s final interest rate will rise also support the rise. However, ANZ Bank economists expect gold to reach $2,100 by the end of this year. Economists explain these expectations as follows:
Declining fears of the regional banking crisis in the US, the resolution of the US debt ceiling negotiations, better economic data, emerging stock markets and hawkish Fed comments suppressed the demand for shelter for gold. Meanwhile, rising returns have increased the opportunity cost of holding gold, causing liquidation in exchange-traded funds (ETFs) and futures. These factors put a short-term pressure on gold prices. However, we believe that structural factors such as interest rate stagnation and fears of a recession in the US are sound. We expect gold prices to move towards $2,100 by the end of this year.
Charts are bullish for precious metal
Gold prices rose sharply in mid-day US trading to a 2.5-month high on Tuesday. Senior analyst Jim Wyckoff evaluates the latest movements of gold as follows. The charts have also been bullish for the precious metal lately. This invites technical-based speculators to the long side of these markets. The weaker-than-expected U.S. retail sales report yesterday morning also supports the notion that the Federal Reserve may step off the gas sooner regarding the rate hike cycle.
US retail sales in June increased by 0.2% compared to the previous month’s expectations of 0.5%. This report and the June US jobs report released in early July seem to hit a sweet spot for market watchers looking for a soft landing for the US economy. Failure to start a US and/or global recession would be a scenario for better global demand for metals. But global growth is not strong enough to require major central banks to continue tightening their monetary policies and raising interest rates, which will reduce demand for the commodity.
Levels to watch for gold prices
Market analyst Patricio Martín looks at technical levels for gold prices. Gold’s outlook remains bullish in the short term after consolidating above the 100-day Simple Moving Average (SMA) at $1,956. In addition, the Relative Strength Index (RSI) stands with a positive slope above its middle line. At the same time, the Moving Average Convergence Divergence (MACD) prints higher green bars, showing that the bulls are in command.
- Resistance levels: $1,985, $2,000, $2,010.
- Support levels: $1,956 (100-day SMA), $1,940, $1,930 (20-day SMA).
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