- Gold prices fluctuate as interest rate expectations influence yields and bullion demand.
- Strong US housing data and Michigan sentiment figures fail to lift the dollar, but positive market sentiment curbs gold gains.
- The XAU/USD pair is trading within the $3,300 to $3,370 range.
Gold (XAU/USD) has seen an uptick on Friday as traders turn their attention to US economic indicators. As of now, XAU/USD has bounced back above $3,350, nearing the upper boundary of its symmetrical triangle formation.
Latest US housing statistics released on Friday, including building permits and housing starts in June, shed light on an improving real estate market.
In addition, the University of Michigan’s initial sentiment data indicates a rise from 60.7 to 61.8, which is slightly higher than the predicted figure of 61.5 for June. This suggests a boost in consumer confidence in the US.
However, the one-year inflation forecast by the University of Michigan for July has decreased from 5% to 4.4%, and five-year inflation expectations have dipped to 3.6% from 4% last month.
The Federal Reserve has maintained interest rates in the 4.25%-4.50% range, leaving investors eagerly anticipating hints about future rate cuts. Market predictions, according to the CME FedWatch tool, show a 57.8% chance of a 25 basis points cut in September, while the likelihood of the Fed keeping rates unchanged is at 39.5% for that meeting.
Market Insights: Gold’s Reaction to Economic Data
- The US saw building permits increase by 139 million in June, surpassing the estimate of 1394 million, which reflects a 0.2% rise after a 2% decline in May. Housing starts surprisingly rose to 1.321 million from 1.263 million, a notable 4.6% increase compared to a 9.7% drop last month.
- On Thursday, Fed Governor Adriana Kugler tempered expectations for short-term easing, stating that “for a while, tariffs will start affecting consumer prices.” Her remarks indicate a hawkish stance due to persistent inflationary pressures.
- In contrast, San Francisco Fed President Mary Daly mentioned, “two interest rate cuts by the end of 2025 seems reasonable,” cautioning that overly restrictive policies could harm the labor market.
- Governor Christopher Waller suggested, “cutting the FOMC policy rate by 25 basis points during the July meeting makes sense,” leaning towards a more dovish perspective given the risks associated with slowing growth and labor market softness.
- The US Consumer Price Index (CPI), released on Wednesday, indicates rising inflation, reinforcing the view that the Fed might slow its pace of cuts beyond September, with a potential easing expected in October.
Gold Price Analysis: XAU/USD Stabilizes Above $3,350
On Friday, gold’s price action has risen as it trades near $3,350, continuing to form a symmetrical triangle. The next resistance is around the $3,362 relative to its downtrend.
The modest increase from April at the 23.6% Fibonacci retracement presents significant resistance at $3,371.
If it breaks above this level, the next target would be $3,400, a crucial psychological and structural resistance, followed by the peak in April close to $3,452.
On the downside, initial support is found at the $3,324 50-day Simple Moving Average (SMA). A 38.2% Fibonacci level offers a firm floor at $3,292.
This sustained movement directs attention toward the 100-day SMA and the 50% Fibonacci level at $3,228.
The triangle’s downward movement indicates that bearish pressures could resurface around $3,200 as a potential target.
With a relative strength index (RSI) hovering near neutral at 54, the market remains balanced, showing traders’ indecision as they await directional cues.
