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Gold price rises ahead of Fed Chair Powell’s second testimony

  • Gold prices remain in positive territory in early Asian trading on Wednesday.
  • Rising expectations of Fed rate cuts continue to boost the yellow metal.
  • The PBoC refrained from buying gold for a month in a row, limiting the upside of XAU/USD.

Gold (XAU/USD) is trading with slight gains on Wednesday during the early Asian session. Mounting speculation that the US Federal Reserve (Fed) is likely to start cutting rates as early as September continues to support the non-yielding metal. Moreover, political uncertainties within Europe and globally could boost the price of gold, a traditional safe haven asset.

On the other hand, the pause in gold purchases by China’s central bank for the second consecutive month could lead traders to reduce bullish bets on the yellow metal as China is the world’s largest consumer of gold. Investors will be keeping an eye on Federal Reserve (Fed) Chair Jerome Powell’s second semi-annual testimony on Wednesday, along with speeches by Fed’s Michelle Bowman and Austan Goolsbee. On Thursday, US Consumer Price Index (CPI) inflation data will be closely watched. This data could offer more clarity on the path of interest rates in the US.

Daily Market Wrap: Gold price gains ground amid rising Fed rate cut expectations

  • China kept its gold reserves stable for the second consecutive month in June, after an 18-month buying spree. Official data from China’s central bank show its gold reserves remain at 2,264 tonnes.
  • Federal Reserve Chairman Jerome Powell said in testimony before Congress on Tuesday that the latest inflation data showed some modest further gains and that “more good data” could open the door to interest rate cuts.
  • Powell stressed that the central bank will continue to make monetary policy decisions on a meeting-by-meeting basis, adding that keeping interest rates too high for too long could jeopardize economic growth.
  • Powell also said inflation readings during the first three months of this year did not boost Fed officials’ confidence that inflation was under control.
  • Financial markets now price in the odds of a Fed rate cut in September at 74%, up from 71% last Friday, according to data from the CME FedWatch tool.

Technical Analysis: Gold price remains bullish in the long term

Gold price is trading on a stronger note on the day after breaking above the descending channel. The precious metal is maintaining its uptrend above the 100-day exponential moving average (EMA) on the daily time frame. The bullish momentum is also supported by the 14-day Relative Strength Index (RSI), which is in the bullish zone around 55.0.

The crucial resistance level for the yellow metal will emerge at the psychological level of $2,400. The next hurdle is seen at $2,432, a high from April 12. A sustained trade above this level could set up XAU/USD for a possible test of the all-time high of $2,450.

On the other hand, a sustained trade below $2,340, the former resistance level, could attract enough bearish demand to target $2,318, a low from July 1. The next contention level to watch is $2,274, the 100-day EMA.

US Dollar Price Today

The table below shows the percentage change of the US Dollar (USD) against the major currencies listed today. The US Dollar was the weakest against the New Zealand Dollar.

USD 0.00% -0.01% -0.01% 0.01% 0.04% -0.06% 0.01%
EUR 0.00% 0.00% 0.00% 0.02% 0.05% -0.06% 0.01%
GBP 0.00% 0.00% 0.00% 0.02% 0.05% -0.05% 0.01%
CAD 0.00% 0.01% 0.01% 0.03% 0.06% -0.04% 0.02%
AUD -0.01% -0.04% -0.02% -0.03% 0.03% -0.07% -0.02%
JPY -0.04% -0.05% -0.04% -0.07% 0.00% -0.09% -0.04%
NZD 0.07% 0.05% 0.04% 0.04% 0.07% 0.11% 0.06%
CHF -0.01% -0.01% -0.01% -0.02% 0.01% 0.03% -0.07%

The heatmap shows the percentage changes of the major currencies relative to each other. The base currency is chosen from the left column, while the quote currency is chosen from the top row. For example, if you choose the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change shown in the chart will represent EUR (base)/JPY (quote).

Source: Fx Street

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