

Market Analysis
Gold (XAU/USD) has gained for the second consecutive day, trading back in the $2,410s amid rising fears of "stagflation"—a term that combines "stagnant" and "inflation" to describe a situation of high inflation paired with weak economic growth and job data. This term is being used following the Philadelphia non-manufacturing Business Outlook Survey, which showed a weak overall result alongside a high prices paid component. Additionally, US Existing Home Sales dropped 5.4% month-over-month in June, signaling further economic slowdown, according to analysts at Rabobank.
Gold's recent uptick is also driven by expectations that the Federal Reserve (Fed) might cut interest rates, making non-interest-bearing assets like Gold more appealing to investors. The interaction between economic indicators and central bank policies will be critical in determining Gold's price direction in the near term.
Traders are awaiting further US economic data later this week, including the Q2 Gross Domestic Product (GDP) growth data on Thursday and the Personal Consumption Expenditures (PCE) Price Index report for June on Friday. The Q2 GDP growth advance estimate is anticipated to show a 1.9% increase, up from 1.4% in Q1, while the PCE price index is expected to rise by 0.1% after remaining flat in May. Although recent easing in US consumer inflation has led to expectations of a potential Fed rate cut in September, any surprise positive data might delay such cuts, which could negatively impact Gold prices.
Another factor affecting Gold is US Vice President Kamala Harris’s successful bid for the Democratic nomination, leading to a reduction in the "Trump trade" and a decline in US bond yields—both favorable for Gold. Polls showing Harris leading Trump suggest a potentially less inflationary outlook if she wins.
The preliminary US S&P Global Purchasing Managers Index (PMI) for July, due for release on Wednesday, will provide additional insights into global economic health and could present short-term trading opportunities for Gold.
Technical Analysis: Gold in a Sideways Consolidation
Gold initially appeared to break out of a sideways range last week but failed to sustain the momentum, retreating back within the range. It may be necessary to redraw the range with a slanted top, indicating that the new high achieved on July 17 was still part of the range rather than a genuine breakout.
This adjustment suggests that Gold might be entering a new down leg within the widening range, potentially targeting the floor and the 100-day Simple Moving Average (SMA) near $2,320. The 50-day SMA at $2,360 could offer temporary support during this decline. A drop below Monday’s low of $2,383 would signal bearish confirmation and further downside towards the range low.
Conversely, if Gold surpasses the $2,483 level—an all-time high—it would indicate a new higher high and suggest the possibility of an upward breakout, potentially extending the uptrend. This could set Gold's next target at approximately $2,555-$2,560, based on the 0.618 Fibonacci ratio of the height of the range.
Paraphrasing text from "FX Street" all rights reserved by the original author.