Gold market analysis

"Gold price at $3,340 likely to be a strong support" 25/7 09:40 am Finalized 

As the US has reached or is preparing to reach trade agreements with major economies one by one, market risk appetite has expanded. After a two-day reversal on Wednesday, gold prices fell further yesterday, and the decline was larger than expected. Spot gold prices dropped to the $1,335.1 level in the early trading session in New York yesterday, with the cumulative decline from Wednesday's high exceeding 61.8% of the maximum increase from July 17 to 23. As yesterday's closing price was lower than Tuesday's low, the daily chart's bullish and bearish candles once again sent a signal of a downturn. Of course, gold prices are still above the 20-day and 50-day SMAs and maintain the pattern of each wave being higher than the previous one since June 30. Although gold prices may be bearish in the short term, it is not advisable to take heavy short positions. 

Measured by the TD line, the current gold price on the daily chart still shows an upward tendency, with the target still at $3,520. However, if it breaks through the extended support of the TD ascending track around $3,337 today, the measured decline target will be $3,226. Additionally, the 20-day SMA is at $3,347.5, while the 50-day SMA is at $3,341.6, providing three levels of protection for the gold price. 

Gold prices are already reflecting the outcome of the interest rate decision next week. 

The Federal Reserve will hold a monetary policy meeting next week. It is expected to maintain the target range of the federal funds rate at 4.25% to 4.5%. However, the Fed's future monetary policy stance will have a greater impact on gold prices. Judging from the current situation, bears may be able to take advantage of the Fed's decision to keep interest rates unchanged next week to push down gold prices. However, it should be noted that Powell previously hinted that if it weren't for the uncertainty regarding tariffs, the Fed would have cut interest rates. He also said that the impact of tariffs on inflation seems to be less than expected. 

Nowadays, as the United States and its major trading partners tend to reach lower reciprocal tariffs, Powell may hint at a preference for a rate cut in September and another possible cut in December at the press conference following the interest rate meeting. Looking further ahead, it is highly likely that Powell will not be reappointed when his term expires in mid-May next year, and he is expected to resign as a director. The market will surely view this as a signal of the Fed's shift towards a dovish stance. At that time, funds are likely to flow into risky assets. Whether gold can gain a foothold due to the decline in interest rates remains to be seen. 

The short-term decline has not constituted a strong reversal. 

From the hourly chart, the spot gold price bottomed out at $3,351 at the opening of the New York market yesterday and rebounded strongly in a piercing pattern. However, it leveled off at the $3,377 level and has been fluctuating narrowly above $3,365 in the early Asian session today. If we consider the entire upward trend since June 29th, the decline that began from the high of $3,439 on Tuesday has not yet reached 50% of the previous rise (to $3,343.3), slightly above the 50-day SMA. A 61.8% decline would bring it to $3,320.7. Therefore, there is still room for the gold price to fall, but it has not yet formed a strong reversal pattern. If it continues to decline today, it is expected to find support at the $3,340 level. A rebound in the short term would face resistance at $3,395. 

The above content is for reference only and does not constitute investment advice. 

MTF Special Analyst Zheng Guangfu