The XAUUSD‘s pullback on Black Monday was driven by speculative factors. The precious metal’s uptrend remains strong, and its short-term prospects will be determined by US inflation data. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Highlights and key points
- The correction of XAUUSD was speculative.
- Since the beginning of the year, the precious metal has grown by almost 21%.
- Bulls’ main advantages remain in play.
- Gold continues to climb towards $2500 per ounce.
Weekly fundamental forecast for gold
On Black Monday, gold experienced a significant decline in value. However, was this a result of fundamental economic factors, or was it driven by other market forces? Investors were deterred by the recession in the US economy, but a recession is an advantageous period for the XAUUSD. The yield on the 10-year US Treasury bond has declined, making it increasingly difficult for this financial instrument to compete with the precious metal. The Bank of Japan’s monetary policy tightening has added to the storm in the market. However, in this case, the Japanese yen is appreciating while the US dollar is falling. Thus, this is positive news for gold, too.
The market turbulence prompted investors to reduce their gold holdings to avoid margin calls on other assets. As soon as the market stabilized, gold purchases resumed, with the XAUUSD returning to its previous highs. Nevertheless, gold edged lower amid the closure of positions ahead of key statistics on producer and consumer prices in the US.
Gold price and global stock index change
Source: Kitco.
Therefore, the decline in the gold price can be attributed to speculative influences. The fundamental outlook remains positive, creating an ideal buying opportunity in the current market conditions. The slowdown in the US economy, along with expectations of a prompt expansion of the Fed’s monetary policy, geopolitical developments, the de-dollarization process, active purchases by central banks, and high demand in Asia, have contributed to a 21% increase in the precious metal’s value since the beginning of 2024. Its key advantages remain in place, so a continuation of the upward trajectory with new record highs is highly probable.
Furthermore, the Fed’s imminent monetary policy easing cycle is exerting downward pressure on the US dollar and US Treasury yields. This creates a favorable environment for both the XAUUSD and capital inflows into gold ETFs. This is occurring for the second consecutive month and is unlikely to cease in August. Historically, this month is considered a period of increased volatility due to many traders going on vacation and reduced liquidity.
Capital flows into gold ETFs
Source: Kitco.
As the United States approaches presidential elections, and geopolitical tensions in Eastern Europe and the Middle East continue to escalate, the demand for gold as a safe-haven asset is expected to increase, contributing to price growth.
Weekly trading plan for gold
In the near term, the XAUUSD‘s trajectory will be driven by the July US PPI and CPI figures. If the data aligns with the forecasts, it will point to decelerating inflation and allow the Fed to reduce the federal funds rate in September. Gold is expected to advance towards the previously outlined target of $2500. Conversely, if inflation accelerates, it could lead to a sell-off towards $2430 and $2410, where bulls will likely try pushing the price higher.
Price chart of XAUUSD in real time mode
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