GOLD Price Gains Momentum: Bullish Sentiment Prevails

Gold price saw a slight uptick during the Asian session on Tuesday, but lacked strong bullish momentum and remained below the key resistance level around $1,935, which was tested last week. Currently trading just above $1,925, up less than 0.10% for the day, traders are eagerly awaiting the release of the latest US consumer inflation figures on Wednesday before making any significant directional bets.

The weakened US Dollar has provided some support to the price of gold. The upcoming US Consumer Price Index (CPI) holds significant importance as it will impact the Federal Reserve's near-term policy outlook. This, in turn, will influence the demand for the US Dollar and potentially provide a meaningful boost to the price of gold. Speculations that the US central bank is nearing the end of its policy tightening cycle have weighed on the US Dollar for four consecutive days, pushing it to its lowest level since May 11. As gold is denominated in US Dollars, this downward pressure on the currency acts as a tailwind for the precious metal. The recently released US monthly employment data indicated the addition of the fewest jobs in 2-1/2 years, suggesting a cooling labor market. Additionally, the New York Fed's monthly survey revealed a drop in one-year consumer inflation expectations to the lowest level since April 2021, declining from 4.1% to 3.8% in June. These factors could potentially prompt the Federal Reserve to adopt a less hawkish stance, further weighing on the US Dollar.

Moreover, concerns about a global economic downturn have added support to the safe-haven appeal of gold (XAU/USD). However, the upward movement lacks strong bullish conviction. Hawkish comments from several Fed officials overnight have reinforced market expectations of a 25 basis points rate hike at the upcoming Federal Open Market Committee (FOMC) policy meeting scheduled for July 25-26. This expectation acts as a headwind for gold, as it is a non-yielding asset. San Francisco Fed President Mary Daly emphasized the greater risks of doing too little rather than overdoing it with rate hikes during an event at the Brookings Institution. Cleveland Fed President Loretta Mester reiterated the need for further monetary policy tightening to combat inflation. Considering these factors, it is advisable to wait for significant follow-through buying before anticipating a substantial appreciation in the price of gold.