From a fundamental point of view, the cooling of US inflation in June made the market expect the Fed to raise interest rates in July as the end of this round, supporting the rebound of gold. However, the Fed is unlikely to completely shift in the short term given the strong resilience of the US economy, and monetary policy will remain tight for quite some time. Coupled with continued geopolitical tensions, the role of the US dollar as a safe currency will not be easily lost in the short term.  

If the Fed continues to take a tough stance, reiterating the need to continue raising interest rates or even further tightening, gold will face the risk of falling back under pressure again. Moreover, if the Fed signals that it has entered the final stage of the tightening cycle, it is expected to support the continued recovery of gold. In addition, inflation expectations are also crucial. If inflation continues to slow down, the Fed will have more room to adjust monetary policy. That is to say, the Fed will be able to continue raising interest rates less eagerly, and instead observe the situation and adjust policies flexibly, which will have a positive impact on gold. 

Technically, a daily-level head-and-shoulders top is in the completion phase, signaling a trend reversal. If it is completed around 1,939 - 1,940, the upside potential of gold will be more sufficient once confirmed. The primary target is the integer mark ofUSD2,000. If the mark of 2,000 is broken, the next target is around the previous high of USD2,070. And it is expected that within this year, gold is expected to break through the previous high of 2,070, stepping further upside. 

Gold trading will be mainly affected by the results of the Federal Reserve meeting by comprehensive judgment. At present, the market generally expects to raise interest rates by 25 basis points in July, and the focus is on the guidance after the meeting. If the guidance is more hawkish than expected, gold may be under pressure. If it is dovish, it will be good for gold. Technically, the support mark of USD 1,940 - 1,950 dollars will have important reference value. Gold traders should pay close attention to the results of the meeting and the market reaction, and be cautious about sudden and large fluctuations.

Hugo Leong

Gold Analyst of Hantec Group