US yields, Fed rate cut bets push XAU/USD higher

Gold prices have risen above $2,400, ending a four-day losing streak due to falling US Treasury yields. Market players are awaiting crucial economic data, including June’s inflation and Q2 GDP, to gauge the Fed’s next move. India’s import tax cut on gold and silver has also boosted retail demand, supporting bullion prices. The US Dollar Index (DXY) is up 0.17% at 104.45, keeping gold prices glued to the $2,400 mark despite posting gains.

Key economic data for gold traders include Durable Goods Orders, the preliminary Q2 GDP number, and the Core PCE for June. Durable Goods Orders are expected to increase from 0.1% to 0.4% month-over-month (MoM), while the Gross Domestic Product (GDP) for Q2 is projected to rise from 1.4% in Q1 2024 to 1.9% quarter-over-quarter (QoQ). The Core PCE is expected to dip from 2.6% to 2.5% year-over-year (YoY).

The latest Consumer Price Index (CPI) data revealed a continuation of the disinflation process in the United States, boosting gold prices and increasing the likelihood that the Fed will cut interest rates starting in September. The December 2024 fed funds rate futures contract implies that the Fed will ease policy by 50 basis points (bps) toward the end of the year, up from 48 a day ago.

Technical factors include the gold price forming a ‘bullish harami,’ a two-candle pattern, hinting that the uptrend could continue in the near term. The Relative Strength Index (RSI) is bullish, indicating that buyers are gathering momentum, which could drive prices higher. XAU/USD needs to clear Monday’s high at $2,412 for a bullish continuation, with the next resistance being $2,450 before challenging the all-time high of $2,483. If XAU/USD tumbles below the July 22 low of $2,384, a deeper correction is on the cards. The next support would be the 50-day Simple Moving Average (SMA) at $2,359.

The Goods Trade Balance released by the US Bureau of Economic Analysis and the U.S. Census Bureau is the difference in value between imported and exported goods during a certain month. Volatility could be erratic during the first releases, but higher exports and less imports are dollar positive, while the other way around should produce a negative effect on the US dollar.