On Thursday (July 18), the price of gold declined somewhat. Spot gold fell 0.2% to close at $2,453.46 an ounce. However, it remained near the record high set in the previous trading day.
According to data released by the US Department of Labor on Thursday, the number of first-time jobless claims increased by 20,000 to 0.243 million last week, higher than the 0.23 million estimated by economists surveyed by Reuters, but due to seasonal factors, this does not mean that there has been a substantial change in the labor market. Furthermore, manufacturing activity in the mid-Atlantic region of the United States expanded more than expected in July, boosted by a surge in new orders. Affected by the data, the US dollar index rose 0.49% to 104.18, the biggest one-day percentage increase since June 13. Gold was also indirectly forced to make small profit take-back adjustments as a result. Meanwhile, the ECB kept interest rates unchanged as expected. The bank's President Lagarde said the September action was “undecided.” The news also put some pressure on gold. However, looking back at the performance of gold over this period, we can clearly see that the price of gold continues to set new historical peak records, which is because the impact of the expectation that the Federal Reserve will cut interest rates in September continues to ferment. At present, the US has been releasing continuously declining inflation data for several months, showing that the overall decline in inflation is optimistic. Furthermore, on the Federal Reserve side, its Chairman Powell made continuous dovish remarks, saying that progress has been made on the road to fighting inflation and further raising the market's expectations and bets on interest rate cuts. At the same time, many Federal Reserve officials have expressed one after another that interest rate cuts will soon arrive, and there is reason to cut interest rates in the next few months. Coupled with the Federal Reserve's Beige Book showing a slowdown in economic growth expectations for the next six months, it has once again consolidated people's expectations that the US will cut interest rates in September. The probability once rose to 100%, helping the continued rebound in gold prices once again reach a new all-time high. Although it is now breaking its record high, the market has been blocked and is facing some correction pressure in the short term, but as long as the Federal Reserve is expected to cut interest rates once or twice before the end of the year, then the probability that gold will strengthen is greater than that of falling.
Source: Yi Huitong
On a technical level, the upward trend in gold prices is expected to continue, but after hitting historic highs, buyers are taking a break. The overall momentum is still favorable to gold buyers, as shown by the Relative Strength Index (RSI), which declined slightly but remained bullish. If gold resumes its upward trend, the first resistance level for the gold price will be the all-time high of $2,483 per ounce. If it breaks through this level, the gold price will target 2,490 US dollars/oz, followed by a psychological level of 2,500 US dollars/ounce. On the other hand, if the price of gold falls below $2,450 per ounce, the first support level will be $2,400 per ounce, followed by a July 5 high of $2,392 per ounce. If it effectively falls below these levels, the price of gold will extend its decline to 2,350 US dollars/ounce.
Bank of China Guangdong Branch Wang Gang
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