Gold consolidates gains above $1410, adds more than $100 in June

With the major economies' central banks including the Fed, the European Central Bank, the Reserve Bank of Australia, and the Bank of Japan adopting a  |  24/06/2019 19:55
  • Major central banks' dovishness helps gold gather strength.
  • Persistent USD weakness provides an additional boost.
  • Heightened geopolitical tensions boost demand for safe-haven assets. 

With the major economies' central banks including the Fed, the European Central Bank, the Reserve Bank of Australia, and the Bank of Japan adopting a dovish stance amid the negative impact of geopolitical uncertainties, the precious metal became a clear investor-favourite and now remains on track to close the seventh straight day with gains. As of writing, the XAU/USD pair was up 1.23% on the day at $1416. Since the start of the month, the troy ounce of the precious metal gained more than $100, or 8.6%.

Meanwhile, the fact that the greenback is facing an intense selling pressure since the FOMC gave in to the market's desire for lower rates provided an additional boost to the pair. According to the CME Group's FedWatch Tool, markets are now pricing a 42.6% probability of a 50 basis points rate cut in July and a 57.4% chance of a 25 basis points cut, leaving the odds of the Fed staying on hold at 0%.

"The Fed is getting ready to cut rates; we expect two 25bp reductions in the federal funds rate, with July and September now the most likely dates," Tony Kelly, Senior Economist – International, Group Economics at National Australia Bank (NAB) said. "There is considerable event risk around these projections – including the upcoming meeting between the US and Chinese Presidents. Risks still appear slanted towards the Fed making more rather than fewer cuts."

Earlier today, the data from the U.S. showed that the Chicago Fed National Activity Index came in at -0.05 in May while the Dallas Fed Manufacturing Index worsened to -12.1 in June from -5.3 in May to show that the business activity in Texas' manufacturing sector continued to contract at a faster pace. The US Dollar Index is now at its lowest level since late March at 95.99, losing 0.12% on a daily basis.

Technical levels to consider

 

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