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Fed Expectations

Gold prices are holding steady at the start of the week following a firm rally across the backend of last week. Fluctuating expectations regarding the Fed continues to be the main driver for gold prices. A further fall in US inflation, as confirmed by last week’s CPI readings, has seen traders scaling back their hawkish expectations beyond the July meeting. While the Fed is still widely expected to hike rates by a further .25%, the market is now pricing in a lengthy pause after this meeting. Against this backdrop, USD looks likely to remain weak which should help keep metals underpinned. However, this view is subject to change should we see any surprise rebound in inflation or jobs data.
 

China Outlook

The risk backdrop is also important to monitor here. With the latest data out of China overnight undershooting forecasts once again, fears over the health of the Chinese economy remain prevalent. Several leading indicators have come in below forecast recently highlighting a trend of weakness. Overnight, quarterly GDP was seen printing 6.3% against the 7.5% the market was looking for. Retail sales were also seen lower than forecast though industrial production was firmer. Overall, while the narrative of weaker Chinese data persists, gold looks likely to remain supported through safe-haven inflow, keeping the near-term outlook bullish.
 

Technical Views

Gold

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The market continues to hold beneath the 1973.51 level for now. If bulls can breach this level, the focus will turn to 2069.41 above, in line with bullish momentum studies readings. To the downside, should the current resistance hold, 1871.04 is the next support level to note. 

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