(Kitco News, Wed. July 19th, 2023) – Growing expectations that the Federal Reserve will end its tightening cycle after next week’s monetary policy decision is providing new momentum for the gold market as prices test another important resistance points.
Gold prices have pushed to a seven-week high, with August gold futures currently trading at $1,979.90 an ounce, up 1.2% on the day. According to some market analysts, this could be the start of a new push to $2,000 an ounce.
Julia Cordova, founder of Cordovatrades.com, said that gold‘s price action is forming a technical bull-flag pattern, and a weekly close above $1,973 would be a breakout move.
She added that the next resistance level to watch would be around $2,017 to $2,020. She said that this level could be tested as early as next week.
James Stanley, market strategist at StoneX, said that the gold bulls are in complete control of the market. He added that he is also watching the $2,000 level closely.
“It might take another day or two, but the momentum and the sentiment are there,” he said.
According to analysts, gold is catching a bid as markets expect next week will be the Federal Reserve’s last rate hike in this tightening cycle. The market has pretty much fully priced in a 25-basis point move next Wednesday.
Stanley added that the weaker-than-expected U.S. retail sales numbers are adding to market expectations Tuesday. U.S. retail sales rose 0.2% in June, following a revised 0.5% increase in May, according to the latest data from the U.S. Commerce Department. Economists expected a 0.4% increase in last month’s headline number.
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Paul Ashworth, chief North America economist at Capital Economics, said that he expects this to be the start of what could be a prolonged downtrend in consumer consumption, which will weigh on economic activity.
“With excess savings all but eliminated, the impact of higher interest rates and tighter credit condition gradually feeding through, and student loan repayments scheduled to resume, we would argue consumption growth will continue to underwhelm in the second half of this year,” he said.
Naeem Aslam, chief investment officer at Zaye Capital Markets, said that he expects next week’s rate hike to be the Federal Reserve’s last, which will continue to support gold prices.
“We think that there is a clear understanding among market players that next week the Fed will fire the last bullet from its gun— from there onwards, conversations will only be about the ongoing pause and a possible rate cut taking place. We believe all of that will be highly positive for the gold price,”
Posted by:
Jack Dempsey, President
401 Gold Consultants LLC
jdemp2003@gmail.com