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  • Gold starts firm in Asia and climbing towards key resistance territory.
  • Iran, trade talks and Fed all on the cards as major risks for gold.  

Gold prices have rallied and are trading 0.35% higher at $1423 at the time of writing having climbed from a low of 1418 at the start of the week following a futures close of    $1,419.30 an ounce and printing  a weekly loss of 0.5%. Gold notched a gain of +0.28% on Friday on a spot basis, despite a solid performance in the greenback and far better than expected Gross Domestic Produce, (GDP), data. The DXY index ended 0.12% higher, printing a solid week of gains on the charts as markets dialled down the Fed’ expectations for the following week.  

The data on Friday showed that U.S. GDP expanded at a 2.1% annualised pace in Q2, topping estimates (1.8%). The consumer and government spending propelled the economy in Q2 which is  an area that the Federal Reserve will likely be concentrated on – Household consumption grew 4.3%, their best showing since late 2017 while government spending grew 5%, its fastest pace since mid-2009. Consequently, the U.S. 2-year treasury yields initially rose from 1.85% to 1.88% following the data and 10-year yields moved between 2.06% and 2.10% while markets price in 28bp of easing at the Federal Reserve this week.  

FOMC and Sino/US trade talks clash

Meanwhile, the Federal Open Market Committee (FOMC) is expected to ease rates this week and it is expected that the central bank to cut its target rates by 25bps with a possibility to an end of  quantitative tightening.   Also, on the radar, we have the Sino/US trade talks clashing with the FOMC and anything other than progress will be seen as a positive for gold.  

“Negotiators for the U.S. and China will face off in Shanghai this coming week in yet another attempt to piece together a trade accord, amid considerably lowered expectations for the kind of sweeping deal that appeared within reach this spring. Modest wins might be obtainable, however.

People close to the talks say a major breakthrough is unlikely on points that led to negotiations breaking down in early May. That includes the U.S. insistence that China commit to legal changes to protect intellectual property and abandon state…”

– Wall Street Journal.

Decision time on Iran

Also, we have risks in the Middle East and its decision time on Iran:

“The US faces  a Thursday deadline on whether to extend or cancel sanctions waivers to foreign companies working on Iran’s civilian nuclear program as permitted under the 2015 JCPOA. Let’s just say if the waivers are cancelled, tensions between the US and Iran, and the US and the EU, will escalate further. The latter are also high over France’s digital tax on US tech giants, of course, with Trump publicly extolling the virtues of US wine he doesn’t drink over French wine he also doesn’t drink,”

analysts at Rabobank explained.  

Gold levels

Gold prices have stabilised above the  20-day moving average at 1411  and the 1400 round number remains intact, a level that is back-up by a confluence of Fibos lining ahead of 1382 swing lows. Bulls can target  1430/40 and 1450s  key areas while to the downside, bears can look to the 1373/76 zone meeting the 19th June spike correction lows.