- Gold price remains rangebound as rate expectations influence yields and bullion demand.
- Resilient US housing data and rising Michigan Sentiment data fail to lift the Dollar but risk-on sentiment limits gains for Gold.
- XAU/USD consolidation build between the $3,300 – $3,370 range.
Gold (XAU/USD) is trading higher on Friday as investors remain focused on Fed expectations US economic data. At the time of writing, XAU/USD recovers above $3,350, pushing the price closer toward the upper boundary of a symmetrical triangle pattern.
Traders are digesting fresh US housing data released on Friday, with Building Permits and Housing Starts for June providing further insight into the health of the real estate sector which improved significantly.
Meanwhile, the University of Michigan (UoM) released the first set of preliminary Sentiment data which rose to 61.8 in July, from 60.7 in June and higher than the estimated 61.5. This reflects an increase in consumer confidence in the US.
At the same time, the UoM 1-year inflation expectations for July fell to 4.4% from 5%, while the 5-year inflation expectations also came in softer at 3.6%, declining from 4% the previous month.
As the Federal Reserve (Fed) continues to hold interest rates within the current 4.25%-4.50% range, investors continue to search for fresh clues on when the Fed may reduce rates. According to the CME FedWatch Tool, markets are pricing in a 57.8% probability of a 25 basis-point (bps) rate cut in September, with the likelihood of the Fed keeping rates unchanged at the same meeting at 39.5%.
Daily digest markets movers: Gold hinges on macro data and Fed rhetoric
- US Building Permits rose 1.39 million in June, beating estimates of 1.394 million and reflecting a 0.2% increase after falling 2% in May. Meanhwil Housing Starts also surprised to the upside, reporting a 1.321 million expansion, up from 1.263 million. A increase of 4.6% shows a very different picture from the 9.7% contraction last month.
- On Thursday, Fed Governor Adriana Kugler pushed back on expectations for near-term monetary policy easing, stating that there should be “no rate cut for some time” as “tariffs begin passing through to consumer prices.” Her comments reflected a hawkish stance centered on persistent inflation pressures.
- In contrast, San Francisco Fed President Mary Daly struck a more balanced tone, saying it’s “reasonable to expect two rate cuts by the end of 2025,” while warning that “overly restrictive policy could unduly hurt the labor market” if the Fed waits too long.
- Fed Governor Christopher Waller adopted a more dovish view, stating, “It makes sense to cut the FOMC’s policy rate by 25 basis points at the July meeting,” citing risks from slowing growth and labor market softness.
- The US Consumer Price Index (CPI) on Wednesday reflected that inflation is showing signs of rising, reinforcing the view that the Fed may delay rate cuts beyond September, possibly pushing easing to October.
Gold Technical Analysis: XAU/USD regains confidence with prices above $3,350
Gold price action is edging higher on Friday, trading near $3,350 as it continues to coil within a symmetrical triangle formation. The next level of resistance lies near $3,362, the downtrend resistance of the chart pattern.
The 23.6% Fibonacci retracement of the April low-high increase provides a firmer zone of resistance at $3,371.
A break above this level would expose $3,400, a key psychological and structural barrier, followed by the April peak near $3,452.
On the downside, the 50-day Simple Moving Average (SMA) at $3,324 provides initial support. With a firmer floor at the 38.2% Fibonacci level at $3,292.
A sustained move below this level would shift focus toward the 100-day SMA and the 50% Fibonacci level at $3,228.
A downside break of the triangle would suggest bearish pressure returning, with $3,200 as a likely target.
With the Relative Strength Index (RSI) hovering near neutral at 54, momentum remains balanced, underscoring indecision as traders await a directional catalyst.
Gold daily chart
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
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