XAUUSD has broken Descending channel in upside
Gold Price Bounces Back Amid US Economic Data Anticipation
Gold has been on a wild ride lately, especially as we await a series of important US economic data releases. Let’s dive into why gold prices are bouncing back and what could be next for this precious metal.
What’s Driving Gold Prices Up?
Federal Reserve Rate Cuts on the Horizon
Gold prices often react to the actions of the US Federal Reserve (Fed). Recently, there’s been a lot of talk about the Fed potentially cutting interest rates. Why does this matter for gold? Well, lower interest rates make bonds and other interest-bearing assets less attractive. When investors get lower returns from these assets, they often turn to gold, which doesn’t yield interest but is seen as a safer bet.
Lately, speculation has been high that the Fed will start cutting rates from September. This anticipation has pushed gold prices up. For instance, during a recent European trading session, gold managed to hold ground near the $2,400 mark as US bond yields took a tumble.
US Bond Yields Take a Hit
The relationship between gold and US bond yields is quite interesting. When bond yields drop, gold prices tend to rise. This is because lower yields mean a reduced opportunity cost for holding gold, which doesn’t generate interest. Recently, the 10-year US Treasury yields fell to around 4.23%, supporting the gold prices.
Political Factors Adding to the Mix
Trump’s Potential Return and Inflation Expectations
The political landscape in the US can also have a significant impact on gold prices. Recently, the potential return of Donald Trump to the presidency has stirred things up. There’s growing speculation that Trump might win the upcoming election, especially after an assassination attempt on him and Joe Biden stepping down from his re-election bid.
XAUUSD is moving in Ascending channel and market has fallen from the higher high area of the channel
Trump’s policies are expected to be more inflationary, with restricted immigration, higher tariffs, and extensions of tax cuts. This has already influenced the US Dollar positively, making it stronger against other major currencies. A stronger dollar typically puts pressure on gold prices since gold is priced in dollars. However, in this case, the inflationary concerns are keeping gold attractive as a hedge.
Gold Prices in India: A Different Story
Impact of Customs Duty Reduction
In India, gold prices have taken a different turn. The government decided to cut the basic customs duty on precious metals from 10% to 6% in the latest fiscal budget. This move, led by Prime Minister Narendra Modi, is expected to boost the demand for physical gold in the country.
Despite the reduction in customs duty, gold prices in India initially dipped. However, the overall demand for gold is likely to increase as the reduced duty makes gold more affordable for consumers.
Upcoming US Economic Data and Its Impact on Gold
Investors are eagerly awaiting a slew of US economic data that could further influence gold prices. Here’s what to watch for:
S&P Global PMI Data
The preliminary US S&P Global PMI for July is set to be released soon. This data will give us an idea of the health of the manufacturing and service sectors. A slight expansion is expected, with the Manufacturing PMI estimated at 51.7 and the Services PMI at 54.4. These figures could impact investor sentiment and, consequently, gold prices.
XAUUSD is moving in Ascending channel and market has reached higher high area of the channel
Q2 GDP and Durable Goods Orders
The US Gross Domestic Product (GDP) for Q2 and Durable Goods Orders data for June are also on the radar. These economic indicators provide insight into the overall economic performance and consumer spending. Stronger-than-expected data could reduce the likelihood of Fed rate cuts, potentially putting pressure on gold prices.
Personal Consumption Expenditures (PCE) Price Index
The PCE index is the Fed’s preferred inflation gauge. If the data shows that inflation is on track to return to the desired rate of 2%, it could solidify expectations for upcoming rate cuts. This would be a positive signal for gold prices, as lower interest rates typically boost gold’s appeal.
Final Summary
Gold prices are currently in a dynamic phase, influenced by a mix of economic data and political developments. The anticipation of Fed rate cuts, the impact of US bond yields, and the political landscape are all playing crucial roles in shaping the gold market. Meanwhile, in India, a reduction in customs duty is expected to increase physical gold demand despite initial price dips.
As we look ahead, the release of key US economic data will be critical in determining the next move for gold prices. Whether you’re an investor or just someone keeping an eye on the market, these factors are essential to watch.
Gold has always been a fascinating asset, acting as both a safe haven in times of uncertainty and a hedge against inflation. As the global economic and political landscape continues to evolve, gold will likely remain a key player in the investment world. Keep an eye on those economic indicators and political developments—they could very well dictate where gold prices head next.
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