Gold increased more than $ 25 on Friday after last week's Sunday drop, as the University of Michigan Consumer Sentiment Index disappointingly plunged to 70.2. This led to a sell-off in the US dollar and a decline in the yield of Treasury bonds, which is very positive for the yellow metal.
According to Bart Melek, Head of global strategy at TD Securities, it is reasonable to assume that the anticipated cut announcement may not be as strong as many suggest given the Federal Reserve's attention to macroeconomic indicators.
The inflation data also turned out to be positive for gold, showing that price pressure may have reached its peak. This means that the Fed will most likely no longer be in such a hurry to reduce inflation.
In addition, the price of gold below $ 1,800 per ounce is an excellent starting point for buyers, which makes this precious metal very attractive from a technical point of view. This is stated by Gainesville Coins' Precious Metal Specialist Everett Millman.
The expert on precious metals added that another positive sign for gold is the growth of physical demand in Asia. "There are some rather optimistic signs on the demand side. We can see that the sales of gold jewelry and gold coins in India have increased. This will stimulate demand," Millman said.
One of the most important developments to watch out for is concerns about the debt ceiling. Last week, Janet Yellen, the US Treasury Secretary, appealed to Congress to suspend or raise the national debt ceiling. The statement came amid escalating tensions between Democrats and Republicans.
Millman said that the problems of the debt ceiling have always been solved, but if the market starts to worry and debt becomes an increasing problem in the headlines, the situation for gold naturally improves.
One of the most important macroeconomic releases for monitoring this week will be released on Tuesday – retail sales, while market forecasts suggest a drop of 0.3%. According to Melek's assumption, if the fall is greater than the expected number, gold will react with an increase in prices.
The focus will also be on building permits and the start of housing construction on Wednesday, as well as unemployment claims and the Philadelphia Federal Reserve Manufacturing Index on Thursday.
Another thing worth paying attention to is the virtual meeting of Federal Reserve Chairman Jerome Powell scheduled on Tuesday, and the minutes of the Fed's July meeting, which will be published on Wednesday.