Gold Outlook: Gold’s sideways movement remains intact

Gold’s appears to be relatively unchanged since this Monday’s open at the time of this report. Today’s report is to discuss the upcoming release of the FOMC’s last meeting minutes, the possible peace talks between Ukraine and Russia, China’s gold holdings and we are to conclude the report with a technical analysis of gold’s daily chart.

FOMC July meeting minutes due out tomorrow

The FOMC’s last meeting minutes are set to be released during tomorrow’s American trading session and are set to garner significant market attention. As a reminder, during the Fed’s last meeting, two Fed Governor’s dissented from the decision to keep interest rates steady, marking the first time two board Governors have dissented since 1993.

Therefore, the July meeting minutes which are due out tomorrow as we previously stated, may provide greater insight into the Fed’s deliberations which resulted in such an event playing out. Furthermore, should the minutes show hesitancy from other members to remain on hold, it may imply that the rift within the Fed may be widening and could lead to further dissenters down the line, potentially towards the more dovish side.

Hence, should the minutes showcase the aforementioned scenario, it may weigh on the dollar whilst aiding gold’s price given their assumed inverse relationship with one another. On the other hand, should the minutes show a more “hawkish” Fed with the exception of the two Governors, it may have the opposite effect and could aid the dollar whilst weighing on gold’s price.  

Ukraine-Russia meeting to occur in the near future?

Following the Trump-Putin meeting in Alaska, the US President hosted a variety of world leaders including the Ukrainian President at the White House this week. Following the meeting, President Trump stated the following on his TruthSocial account “During the meeting we discussed Security Guarantees for Ukraine, which Guarantees would be provided by the various European Countries, with a coordination with the United States of America.

Everyone is very happy about the possibility of PEACE for Russia/Ukraine. At the conclusion of the meetings, I called President Putin, and began the arrangements for a meeting, at a location to be determined, between President Putin and President Zelenskyy.” Overall it appears that progress is being made to provide security guarantees to Ukraine and to introduce the “peace-deal discussion” format.

Thus, the possibility of a ceasefire or a peace deal down the line may weigh on gold’s price as geopolitical tensions may begin to ease. However, we must stress that these talks may be prolonged and could take time to truly materialize, and thus the potential impact on gold’s price may be seen further down the line.

China’s official gold holdings increase once again

According to recent a report by the World Gold Council (WGC), “China’s official gold reserves rose by 2t in July, scoring the ninth consecutive monthly purchase, to 2,300t.” The continued increase and accumulation of gold holdings by the PBoC tends to underscore the continued demand for the asset given it’s safe haven status.

Moreover, continued demand from major players such as China could potentially aid gold’s price in the future, yet an unexpected halt to their ongoing increase could lead to heightened volatility and may weigh on gold’s price. Nonetheless, the overall continued demand for the precious metal could possibly provide some support for gold’s price should it be maintained.

Gold Technical Analysis

XAU/USD Daily Chart

• Support: 3240 (S1), 3115 (S2),  2980 (S3)
• Resistance: 3385 (R1), 3500 (R2), 3645 (R3)

XAU/USD appears to be moving in a sideways fashion, with the commodity having remained within our sideways moving channel which was incepted on the 30th of April, despite some breakouts.

Nonetheless, we opt for a sideways bias for gold’s price and supporting our case is the RSI indicator below our chart, which currently registers a figure near 50, implying a neutral market sentiment. For our sideways bias to be maintained we would require gold’s price to remain confined between the 3240 (S1) support level and our 3385 (R1) resistance line.

On the other hand, for a bearish outlook we would require a clear break below the 3240 (S1) support level with the next possible target for the bears being the 3115 (S2) support line. Lastly, for a bullish outlook, we would require a clear break above our 3385 (R1) resistance line with the next possible target for the bulls being the 3500 (R2) resistance level.

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