Gold is expected to experience short-term oscillating declines, with resistance levels at 1984 and 2015, and support levels at 1945 and 1913. The second-quarter GDP surpassed expectations, fueling speculation of a soft landing for the US economy. As a result, gold's short-term rebound appears unlikely. Considering CFTC positioning data and technical analysis, gold is exhibiting a long-term downward trend, potentially leading to short-term oscillating declines.

Last week (7.24-7.30), precious metals experienced mixed movements, with gold rising by 0.7%. Silver declined by 0.1% during the week. With the expected 25 BP increase in interest rates by the Fed last week, gold initially rallied and reached a high of $1982.04. However, the strengthening of the US dollar due to the European Central Bank (ECB) 's dovish stance and its own 25 BP rate hike caused gold to fluctuate downwards. Ultimately, it closed at $1958.91.

Source: MacroMicro - Percentage Change of Major Precious Metal futures in the 4th Week of July  

On July 27th, Beijing time, following a two-day monetary policy meeting, Fed  Chairman Jerome Powell announced a 25 BP rate hike, raising the federal funds rate target range to 5.25% - 5.5%. This marks the highest level since 2001 and was in line with market expectations. Powell stated that although inflation has moderated, it will take a long time to reach the 2% target.

Regarding a potential rate hike in September, Powell mentioned that no decision has been made yet for the September meeting, and it will depend on economic data. If necessary, the Fed may raise rates in September; otherwise, rates could remain unchanged. Additionally, he responded by saying that there would be no rate cuts this year. Gold rose during trading to around $1982 on the positive news.

Meanwhile, on the same day, the ECB raised three key interest rates: the refinancing rate, the marginal lending rate, and the deposit facility rate by 25 BP each to 4.25%, 4.50%, and 3.75% respectively. This is the ECB's 9th consecutive rate hike since starting the tightening cycle in July last year, totaling 425 BP. However, ECB President Christine Lagarde hinted at a possible pause in the year-long rate hike action, and market expectations of rates nearing their peak increased. As a result, the Euro/US dollar exchange rate plummeted, the US dollar gained support, and gold's rebound faltered, giving back its gains from the previous two days.

Mitrade Analyst

The main reason for the rise in gold after the recent Fed rate hike is that the market generally expected the July rate hike to be the end of the Fed's tightening cycle. The anticipation of no rate hike in September and a lack of support for further dollar appreciation contributed to gold's increase, reaching a high of $1982 when the Fed announced the rate hike. However, the Euro/USD suffered a significant decline due to the ECB hinting at the end of its rate hiking cycle after raising rates, which boosted the dollar and caused gold's rebound to lose momentum.

Matt Simpson, Senior Market Analyst at City Index, stated, "The market's assessment that the Fed's rate hikes are nearing or at their endpoint is accurate, as core inflation reports in the US indicate an accelerated pace of de-inflation. Gold has performed well since finding support around $1900."

On July 27th, the US released its preliminary second-quarter GDP data which showed a higher-than-expected QOQ growth rate of 2.4%, surpassing market expectations of 1.8% and the first-quarter GDP growth rate of 2%. This strong performance was driven by growth in consumer spending, non-residential fixed investment, and government expenditure. Additionally, the data release also exceeded expectations for initial jobless claims and durable goods orders from the previous week. Following this series of economic data releases, gold quickly declined by $7 in the short term.

Mitrade Analyst 

The initial GDP figures for the second quarter, coupled with several positive economic data releases in the US, indicate that the country's labor market is stable. Household consumption demand remains strong, and consumer spending is gradually increasing. As a result, concerns about an economic recession in the US have diminished, leading to a decrease in safe-haven demand and an increase in expectations of a soft landing for the US economy. Additionally, market expectations suggest that interest rates will remain high for a significant period, which will support the US dollar but be unfavorable for gold prices.

Recently, speculative long positions in gold have significantly increased. According to the latest CFTC position data from July 19th-25th, speculative long positions in gold decreased by 19,709 to 173,639 compared to the previous period. During the same period, within open gold futures contracts, speculative long positions also experienced a substantial decrease of 15,511 to 248,229, while short positions increased by 4,198 compared to the previous period. This information indicates that short-term market investors have turned bearish on gold.

Mitrade Analyst 

In conclusion, the withdrawal of speculative long positions suggests a cautious or bearish outlook on the future of gold. Aggressive short positions are being added to bet against the future of gold, indicating that gold may experience a volatile decline this week.

From a technical standpoint, the 60-day MA is showing a downtrend. The 14-day RSI value of 51 is below 60 and also trending downward. At the same time, the MACD daily chart shows a death cross as the short-term moving average crosses below the long-term moving average. The gap between the two lines is gradually widening, with the histogram located below the zero line and gradually decreasing. The DIFF and DEA are positive values, but the MACD is negative, indicating a potential short-term or bearish consolidation for gold.

Resistance levels: 1984, 2015

Support levels: 1945, 1913

Source: Investing.com- July 31 Gold Daily Chart

 Mitrade Analyst 

Based on the analysis of various indicators, the medium to long-term downtrend in gold remains unchanged. This week, gold may experience a volatile decline.

Additionally, investors should pay attention to news and Economic Data that could provide guidance for the future direction of gold, such as the US unemployment rate and non-farm payroll numbers for July.