- Gold is expected to rise as support for interest rate cuts in July grows, alongside declining harvests.
- The US dollar index has dipped to 98.48, making dollar-priced gold more attractive.
- A University of Michigan study suggests that emotions have improved and long-term inflation expectations have eased.
Gold prices are likely to rise during Friday’s trading sessions, gaining traction as the US dollar weakens. Comments from a Federal Reserve Governor shifted mid-day, hinting at possible interest rate cuts in July. Currently, XAU/USD is trading at $3,353, reflecting a 0.43% increase.
The mood in the market appears optimistic, as the University of Michigan reports that Americans are becoming more positive about the economy and that inflation rates seem to be declining. Recently, Governor Christopher Waller hinted that the central bank might opt for interest rate cuts in upcoming monetary policy meetings, which is seen as beneficial for the gold market, leading to lower yields on US Treasury bonds.
The US Dollar Index (DXY), which measures the dollar’s strength against a basket of six currencies, has fallen by 0.13% to 98.48. A weaker dollar generally boosts the appeal of precious metals priced in dollars, making gold less costly for international investors.
In light of Waller’s statements, traders adjusted their expectations, raising the projected interest rate cut to 45 basis points by the year’s end from 42 bps the previous day, as indicated by the December 2025 Fed funds futures contract.
Gold did not match its weekly high from Wednesday, which was shaped by speculation that President Trump might consider removing Fed Chairman Jerome Powell. Though he later retracted those comments, the speculation still affected the market.
Looking ahead, next week’s US economic data will include reports on housing, S&P Global Flash PMI, unemployment claims, and durable goods.
Gold Daily Market Mover:
- The Consumer Sentiment Index from the University of Michigan increased from 60.7 to 61.8, signaling a positive change, exceeding July’s estimate of 61.5. Research Director Joanne HSU noted that consumer confidence typically requires reassurance that inflation will stabilize.
- The survey also downgraded inflation expectations, indicating a decline in anticipated inflation to 3.6% or 4% for the next five years, with a decrease to 4.4% from the previous month’s 5% for the coming year.
- Gov. Christopher Waller observed that, while the overall labor market is healthy, the private sector isn’t faring as well. He supports the idea of rate cuts at the July meeting but remains noncommittal.
- US economic data showed a mixed picture on inflation, with the consumer price index (CPI) nearing the 3% mark, while the producer price index (PPI) trended downward. Stronger than expected retail sales largely stemmed from price hikes due to tariffs.
- US Treasury yields dropped throughout the day, with 10-year Treasury yields typically inversely correlated with gold, falling 3 basis points to 4.421%.
- Current probabilities indicate that the Fed may hold interest rates steady, with a 94% chance at the July 30 meeting for no change, and a 6% chance of a 25-point cut.
XAU/USD Technical Outlook: Gold price is around $3,350
Gold is likely to stabilize around the $3,350 mark for today, as traders look ahead to the weekend. If XAU/USD surpasses this week’s peak of $3,377, the next resistance level could be $3,400. Breaching that might set the stage to challenge the June 16 high of $3,452, potentially leading toward a record high near $3,500.
If XAU/USD drops below $3,300, it may target a decrease to $3,246, followed closely by the 100-day simple moving average of $3,209.
