Gold Price Stabilizes at 50-Day SMA After US GDP-Driven Sell-Off
Market Focus:
The focus now shifts to the release of June's core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's preferred inflation gauge. This data is expected to influence market expectations for future interest rate cuts by the Fed.
Analysts predict a decrease in the core PCE from 2.6% to 2.5% year-over-year in June, moving closer to the Fed's 2% target. A larger-than-expected decline could bolster expectations of further rate cuts after September.
Additional Factors:
- Overweight Long-Positioning: Analysts at TD Securities suggest that gold's recent weakness may be due to an excess of long positions, leading to a market rebalancing.
- Decline in Asian Demand: The weakening US Dollar and appreciation of Asian currencies have led to reduced demand from Asian central banks, which typically hoard gold as a hedge against currency depreciation.
- Liquidations in Shanghai: Significant liquidations from Shanghai Futures Exchange (SHFE) gold and silver traders have also contributed to the downward pressure on prices.
Technical Analysis:
Gold remains in a sideways market within a widening range since May. The recent down leg found support at the 50-day SMA. A close below this level could extend the decline towards the 100-day SMA at around $2,320.
The bearish crossover in the MACD indicator confirms the ongoing downward movement. However, a break above the all-time high of $2,483 could signal a potential upside breakout, with the next target estimated around $2,555-$2,560.