———-INTERNATIONAL GOLD PRICES REBOUND; DOLLAR WEAKENS———-
Tuesday, July 25, 2023
On Tuesday, international gold prices rebounded after hitting a more than one-week low of $1,953.12 an ounce, benefitting from a weaker dollar. Traders are eagerly awaiting signals from the Federal Reserve (FED) regarding interest rate hikes and guidance on monetary policy before making any significant moves.
At 15:10 Beijing time, spot gold rose 0.35% to $1,961.49 an ounce, while the main COMEX gold futures contract increased by 0.04% to $1,962.9 an ounce. Concurrently, the U.S. dollar index fell 0.12% to 101.261.
According to the latest data from CME, the open interest of COMEX gold contracts rose by around 7,800 contracts on Monday, ending a consecutive two-day decline. The trading volume also increased by approximately 90,300 contracts, demonstrating a volatile performance. The decline in gold prices on Monday allowed the possibility for further losses in the near term, with the one-week low of $1,945 acting as short-term support.
Matt Simpson, senior market analyst at City Index, suggested that gold would likely hold above $1,950 and aim for a technically driven pullback to $1,965 after four days of decline. However, he emphasized the necessity for new clues from the upcoming Federal Open Market Committee (FOMC) meeting to make informed trading decisions.
The latest S&P Global Composite Purchasing Managers’ Index (PMI) data for July in the United States was weaker than expected. The number fell to 52 from 53.2, contrary to expectations of 53.1. Simultaneously, the S&P Global Manufacturing PMI rose to 49 from 46.3, while the Services PMI fell to 52.4 from 54.4. Additionally, housing and inflation data released last week suggested that the Fed might be nearing the end of its rate hike cycle.
Markets are now closely watching the Fed’s upcoming monetary policy meeting. Traders anticipate that the Fed will keep rates within a range of 5.25% to 5.5% after raising rates by 25 basis points this month, with a potential cut not expected until 2024, according to the CME’s “FedWatch” tool.
Market participants speculate that the Fed is prepared to conclude its tightening monetary policy and seek further guidance from Fed Chairman Jerome Powell’s press conference. A hawkish Fed could potentially strengthen the dollar and present headwinds for gold prices.
Economists at ANZ Bank analyzed the outlook for gold, suggesting that the risk of a U.S. recession is evident in an inverted yield curve. This observation has increased speculative long positions and subsequently boosted gold investment.
With traders eagerly waiting for guidance from the FED and the possibility of a changing monetary policy, the future trajectory of gold prices remains uncertain. Market participants will closely watch the upcoming FOMC meeting and subsequent press conference for further clarity on the outlook for gold and the global economy.