Gold Rallying

The fall in USD this week has helped gold prices recover sharply.  With US inflation seen cooling further last month, US rate hike expectations have plummeted. While a hike is still priced in for the July meeting, beyond that traders are expecting the Fed to hold rates steady through until the first projected rate cut around March. Given the downturn we are seeing in USD, gold prices look likely to move higher in coming weeks as this shift in market expectations gathers more traction. Looking ahead, incoming US data holds the power to further drive down US rate projections as we move through summer.

Rate Cut Expectations

Looking ahead, focus will then shift to Fed rate cut expectations which were prominent earlier in the year, when gold was rallying, before hawkish expectations resurfaced. If US data starts to cool through the summer and into Q3, this will likely see rate cut expectations brought forward, pulling USD down lower and allowing gold room to rally further. As such, jobs data in particular will be key to watch as will output figures. Any signs of a forthcoming US downturn should be particularly beneficial for gold prices, driving safe-haven demand.

Technical Views

Gold

The rally in gold prices has seen the market rallying back up towards the 1973.51 level. This is a key area for the market and a break above here will be firmly bullish, putting focus back on the 2069.41 level. However, should we fail here, risks remain tilted towards a further move lower with 1871.04 the key support to watch.