Gold Price Update: XAU/USD Rises as Search for Catalyst Rumbles On

Gold rises as a weaker US Dollar and uncertainty around monetary policy continues.
ISM data later today before all attention turns to US jobs data later in the week.
Trendline break and price action hint at at a potential rise toward the $2370 resistance handle.

Market participants are closely watching for a new catalyst to drive gold prices in a definitive direction. After experiencing gains of up to 13% in the first half of the year and reaching a record high near $2440 per ounce, there is growing concern among market participants about the potential for a significant pullback in the price of the precious metal.

The geopolitical context which added to gold appeal in the first half of 2024 is yet to be resolved, but has quieted down of late. The chance of a wider war in the Middle East remains and for now this could continue to provide a modicum of support for gold prices.

The constant back and forth on the rate path from the US Federal Reserve is set to continue. The Fed have trimmed down their expectations to one rate cut in 2024, but market participants continue to price in three, starting in September 2024. Lower rates would appeal to gold bulls as the lower yield and weaker US dollar could facilitate a push to fresh highs…. In short an interesting quarter ahead that is packed with potential outcomes. Once more, a shorter-term outlook may prove more beneficial in the constantly changing landscape of monetary policy.

US PMI, NFP Data and Independence Day Holiday

There are a host of market moving events ahead this week. The most pertinent for the US dollar and gold prices will be the NFP and unemployment report due on Friday. This could significantly impact the rate cut expectations and thus lead to significant volatility around Gold prices.

Later today however, eyes will be focused on S&P and ISm manufacturing data from the US.Once again traders will be focused on the overall health of the US economy as well as order numbers. This would provide valuable insight into spending and an idea of how well the US consumer is coping with higher rates. A robust number later today is likely to inject some strength into the US dollar while a miss will likely benefit gold and weigh on the US dollar.

The previous ISM print recorded a significant drop off in new orders which is a slight concern and something market participants will be keeping a watch on. The chart below provides a visual representation of all the key data points around the ISM and S&P manufacturing data.

Source: LSEG (click to enlarge)

Technical Analysis on Gold (XAU/USD)

Gold put in a stellar recovery on Thursday and Friday last week, following a brief stint below $2300 (discussed in last week’s Gold article). The brief dip was met with significant buying pressure and some mixed US data which saw the precious metal break back above the key $2320 resistance handle.

The $2320 resistance break was preceded by a trendline break on the H2 timeframe which added another layer of confluence. The rally gathered pace and looks set to close above the $2334 resistance handle which opens up a potential retest of the $2350 psychological level.

Alternatively a rejection at $2334 could see the price filter back toward the $2320 mark which held firm this morning. A break of $2320 and the $2300 handle comes into focus before last week’s lows around $2293.

Gold (XAU/USD) H2 Chart, July 1, 2024