Despite gaining more than $20 on Friday, the gold market has yet to prove that the downtrend is over, according to analysts, who are watching the June inflation report to be announced next week carefully as a potential trigger.
Increase in gold prices will be limited in the short term
The US economy added 209,000 new positions against expectations of 225,000, according to data released on Friday. Gold prices rebounded on the weaker-than-expected June employment data. However, this was the weakest gain since December 2020.
Slowing job growth is good news for gold as it could eliminate the need to raise twice this year, a promise Federal Reserve Chairman Jerome Powell made repeatedly in June. However, last month’s employment slowdown was not severe enough to prevent the Fed from raising interest rates in July. This means that increases in gold prices will likely be limited in the short term. Andrew Hunter, deputy chief economist at Capital Economics USA, comments:
The slowdown in job growth will be welcomed by Fed officials. Especially after the alarming (and seemingly misleading) increase in ADP measurement announced yesterday. In particular, the downward trend in wage growth seems to have stopped. However, it is unlikely that the Fed will prevent it from raising interest rates again later this month.
It will be a fierce battle for gold!
Just over two weeks until the Fed’s July 25-26 meeting. Therefore, the markets will carefully monitor the inflation figures for June, which will come on Wednesday. Michael Boutros, senior technical strategist at Forex.com, says the macroeconomic outlook is one of the biggest hurdles for gold in the short term. Boutros, his views
Markets are pricing in the possibility of a 92% rate hike in July. But only one rate hike is expected as the Fed sends two rate hike telegrams. If this situation changes, it could limit the upside for gold.
cryptocoin.comAs you follow, the US dollar took a hit on Friday. This supported gold prices over the weekend. The US dollar index (DXY) fell 0.87% on the day to 102.27. “It will be a contentious battle for gold,” Boutros said. I don’t see a big drop,” he says.
next weeka be very wavyqueer!
OANDA senior market analyst Edward Moya says the long-term outlook for gold is bullish as the labor market weakens, leading to a much weaker economy. Based on this, Moya makes the following statement:
It will eventually turn bullish for gold. But it’s tough for the yellow metal right now as more rate hikes are priced in. Next week’s inflation report could be pretty bland. Trading could be very volatile next week.
These levels will be important for gold prices
From a technical standpoint, Boutros points out that gold can only break the downtrend once it rises above the $1,943 and $1,965 price levels. In this context, Boutros draws attention to the following levels:
The $1,903-10 range has always been a rock solid critical support zone. This level has held in the near term. The broader trend from the April-May highs is still intact. But gold isn’t considered to be out of the woods until a daily close above $1,943 and $1,965. Then a broader uptrend could take root.
Boutros warns that eyes should be at $1,891 if gold goes down. If it breaks this level, a massive drop to $1,830 is possible for gold. Moreover, Boutros states that this will only be the first level of support.
Data calendar for next week
- Monday: Speech by Barr, Fed’s Vice Chairman of Audit.
- Wednesday: US CPI, Bank of Canada interest rate decision.
- Thursday: US PPI, US unemployment claims.
- Friday: Michigan consumer expectations.
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