On July 30, market sentiment was cautious as gold prices edged lower ahead of the Federal Reserve's pivotal interest rate decision. Spot gold traded near $4,020 during early morning hours, extending the previous session's decline. The interest rate swap market indicates approximately a one-third probability of a 25-basis-point rate hike by the Fed, an unusually high level of uncertainty for a market approaching a policy announcement.
Policymakers face a dilemma between the lower-than-expected inflation data from June and the rising oil prices triggered by the resurgence of conflict in the Middle East this month. Since the outbreak of the Middle East war five months ago, gold prices have fallen by nearly a quarter, as high energy costs intensify inflationary pressures. However, supported by bargain buying, gold has remained near the key support level of $4,000 per ounce since late June.
The U.S. dollar index was flat ahead of the Federal Reserve's rate decision, as uncertainty surrounding the outcome was exceptionally high. Economists at Goldman Sachs expect the Fed to hold rates steady, but anticipate at least one dissenting vote in favor of a rate hike. In a note, they stated that energy price volatility caused by the war clouds the outlook. Current market pricing suggests about a 30% chance of a rate hike today. Goldman Sachs noted that if the Fed maintains rates today, the focus in the foreign exchange market will shift to how much of the previously priced-in rate hike expectations will be transferred to subsequent meetings. Data from the CME Group shows that investors have already priced in expectations for a rate hike in September. All eyes are on the Federal Reserve's rate decision in the early hours.
Spot Gold (London Gold): Technically, the daily chart showed a small bearish candlestick yesterday, with the Bollinger Bands about to open. The KDJ indicator is issuing a bearish divergence signal, while the MACD fast line remains above the slow line, but the red energy bar is gradually converging. The overall trend remains upward, but the medium-term trend is showing a phase of decline. On the 4-hour chart, the Bollinger Bands are opening, and prices have chosen a new direction as expected. The KDJ indicator is about to form a golden cross, while the MACD fast line is below the slow line, but the green energy bar is gradually shrinking. On the hourly chart, the Bollinger Bands are open, and prices have chosen a new direction as expected. The KDJ indicator is about to form a golden cross, while the MACD fast line is below the slow line, and the green energy bar is expanding. Prices have rebounded as anticipated. In the short term, focus on the rebound situation. Support levels below are at $4,011, $3,995, and $3,960, while resistance levels above are at $4,048, $4,081, and $4,102.
Shanghai Gold: Focus on 881 and 885 above, and 874 and 868 below.
Spot Silver (London Silver): The broad trend is range-bound, with a medium-term phase of decline. Prices have rebounded as expected. In the short term, focus on the rebound. Resistance above is at 60.9 and 63.1, while support below is at 57 and 54.7.
Shanghai Silver: The trading range is between 13,220 and 14,450, with a broader range between 13,220 and 14,900.
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