Market Analysis

Gold prices (XAU/USD) have continued to rise for the second consecutive session, trading around $2,400 per troy ounce during the European session on Monday. The recent US Personal Consumption Expenditures (PCE) Price Index data, which revealed a modest increase in inflation for June, has bolstered expectations for an imminent start to the Federal Reserve's (Fed) rate-cutting cycle. This development has contributed to a further decline in US Treasury bond yields, putting pressure on the US Dollar (USD) and providing support for the non-yielding gold.

Additionally, ongoing geopolitical risks related to conflicts in the Middle East are adding further support to gold prices. However, the upside potential for gold is somewhat limited due to the positive sentiment in global equity markets, which generally reduces demand for traditional safe-haven assets like gold. Traders are also cautious, awaiting the outcome of the Federal Open Market Committee (FOMC) meeting scheduled for Wednesday, as well as key US economic data for the start of the month, including the Nonfarm Payrolls (NFP) report, which could influence the commodity's direction.

Technical Analysis: Gold Price Struggles to Sustain Gains Above $2,400

From a technical standpoint, recent attempts to sustain gains beyond the $2,400 mark have been unsuccessful, with gold repeatedly failing to hold above this level. The bounce off the 50-day SMA suggests some caution for bearish traders, as daily chart oscillators remain neutral. Bulls have found it challenging to drive the price higher, making it essential to wait for a stronger buying signal to confirm that gold has reached a bottom.

Currently, any momentum above the $2,400 level may face resistance near the $2,412 area, followed by last week’s swing high around $2,432. A sustained break above this resistance would indicate that the recent correction from the all-time high has ended, potentially paving the way for further gains. The next resistance levels to watch would be around $2,469-2,470, with the potential to challenge the record peak of $2,483-2,484.

Conversely, a drop below the $2,380 level could attract buyers near the 50-day SMA, which is currently around the $2,360-2,359 region. However, a significant decline below this support could trigger further bearish momentum, pushing the gold price towards the next support level at $2,325. A breakdown below this level might extend the decline towards testing the $2,300 mark, a level not seen since late June.

Paraphrasing text from "FX Street" all rights reserved by the original author.