The gold price has seen a decrease in momentum below the $2,400 barrier due to China’s Central Bank’s decision to stop buying gold for the second consecutive month in June. This pause in gold buying by the world’s largest bullion consumer has had a noticeable impact on the price of the precious metal.
There is speculation that the US Federal Reserve (Fed) will cut interest rates in the third quarter, which could potentially cap the downside of the XAU/USD. The possibility of a rate cut has increased following recent employment data, with markets now pricing in a 77% chance of a rate cut in September.
Political uncertainty in France, particularly after exit polls suggested a hung parliament in the final round of the parliamentary elections, has also contributed to a rise in safe-haven assets like gold. This uncertainty, combined with the potential for a Fed rate cut, has added to the complexity of the current market situation.
Technically, the gold price maintains a bullish trend on the daily chart, staying above the key 100-day Exponential Moving Average (EMA). The precious metal has broken out above a descending trend channel that formed on May 10, indicating a potential for further upward movement in the price of gold.
Traders will be closely monitoring Fed Chair Jerome Powell’s testimony, as well as the release of the US June Consumer Price Index (CPI) inflation data. These events are likely to provide further insight into the direction of gold prices in the near future.
The gold price faces upside barriers at the $2,400 psychological level, $2,432 (a high of April 12), and an all-time high of $2,450. On the downside, support levels are located at the $2,330-$2,340 zone and the 100-day EMA at $2,273. These price levels will be critical in determining the future movement of gold prices.
The pause in China’s gold buying, coupled with speculation surrounding Fed rate cuts and political uncertainty in France, has created a complex and volatile environment for gold prices. Technical analysis suggests a bullish trend, but upcoming events and price levels will play a significant role in determining the direction of the precious metal. Traders and investors should exercise caution and stay informed about the latest developments to make informed decisions in the gold market.