At the end of the Asian market on Tuesday (July 9th), spot gold maintained its intraday rebound trend, with gold prices currently around $2363 per ounce. FXTree Senior Analyst Dhwani Mehta's latest article on Tuesday analyzes and predicts the technical trend of gold prices.

Mehta wrote that after falling from a six week high of $2393 per ounce on Monday, gold prices rebounded during Asian trading on Tuesday. Traders eagerly await the testimony of Federal Reserve Chairman Powell in Congress, seeking new clues about the timing of interest rate cuts.

Mehta pointed out that due to increased bets on the Fed's interest rate cut, gold prices remain in "buy on dips" trading.

Spot gold closed down $32.04, a decrease of 1.34%, at $2359.24 per ounce on Monday; Gold prices fell to a low of $2350.82 per ounce during trading.

At 22:00 Beijing time on Tuesday, Federal Reserve Chairman Powell will deliver his semi annual monetary policy testimony to the Senate Banking Committee. The market will pay attention to the judgments on inflation conditions and the views on future monetary policy paths.

At the annual Sintra Forum held by the European Central Bank last Tuesday, Powell stated that significant progress has been made in inflation progress as the US economy returns to the path of slowing inflation. Analysts believe that his remarks are seen as dovish.

Powell said at the time, "If the labor market unexpectedly weakens, it will also prompt us to take action." The data indicates that the Federal Reserve has made significant progress in combating inflation. The Federal Reserve has the ability to take the time to make the right decision (to cut interest rates), but it is well aware of the risks of taking action too slowly and too late. Powell's remarks have stimulated a short-term surge in gold prices on the same day.

Jeff Klingelhofer, co head of investment at Thornburg Investment Management, said, "Based on Powell's recent statements, he has a strong tendency to initiate a mild easing cycle."

The United States released a disappointing labor market report last Friday. The non farm payroll in the United States increased by 206000 people in June, although exceeding expectations of 190000 people, it still fell significantly from the previous value of 272000 people. In addition, the total number of new jobs added in April and May decreased by 111000 compared to before the correction. The average hourly wage in the United States increased by 3.9% year-on-year in June, consistent with expectations and the lowest level since the second quarter of 2021.

Mehta pointed out that Powell's comments may strengthen the dove expectation of the Federal Reserve, pushing the gold price to a historical high of more than 2400 dollars/ounce, while the yield of the US dollar and US treasury bond bonds will be suppressed. In addition, several other Federal Reserve policy makers may also give speeches on Tuesday, which may drive gold prices against the backdrop of weak US data.

The Federal Reserve Watch tool of the Chicago Mercantile Exchange Group (CME Group) shows that the market expects a 77% likelihood of the Federal Reserve cutting interest rates in September. It is expected that interest rates will be lowered again in December.

Latest trading analysis of gold

Mehta stated that due to the 14 day relative strength index (RSI) rising again above 50, the short-term technical outlook for gold prices remains constructive.

Mehta pointed out that gold buyers must overcome the six week high of $2393 per ounce in order to resume the upward trend towards the historical high of $2450 per ounce. Prior to this, breaking through the $2400/ounce level could be a tricky task for buyers.

On the other hand, Mehta added that gold prices may receive short-term support at the psychological level of $2350 per ounce. If they fall below this level, the $2340 per ounce support area will be challenged. The 50 day moving average (SMA) and the 21 day moving average converge in the aforementioned regions.

If the gold price continues to fall below the $2340/ounce range, it may trigger a new downward trend and fall towards the integer level of $2300/ounce.