On Tuesday (July 23), spot gold prices rebounded strongly, with gold prices briefly breaking through $2410 per ounce during trading and ultimately closing around this level.

Analysts point out that due to India's measures to reduce import taxes on gold and silver, which are expected to boost global gold demand, spot gold has ended its four consecutive declines.

India plans to significantly reduce import tariffs on gold and silver

The Indian government announced on Tuesday that it plans to lower import tariffs on gold and silver from 15% to 6%. Industry insiders say that this move may boost retail demand and help curb smuggling activities in India.

In order to increase the domestic added value of gold and precious metal jewelry, I propose to lower tariffs on gold and silver to 6%, "said Indian Finance Minister Nirmala Sitharaman in her budget speech on Tuesday

She also announced the exemption of import tariffs on 25 key minerals, including lithium. India has been exploring ways to ensure the supply of lithium, which is a key raw material for manufacturing electric vehicle batteries.

After the news came out, gold prices surged from Tuesday's low of $2388.20 per ounce. During Tuesday's New York session, gold prices rose to $2411.91 per ounce at one point and closed at $2409.39 per ounce on Tuesday.

The increasing demand for gold in India may push up global gold prices, as India is the world's second-largest consumer of gold.

FXStreet analyst Christian Borjon Valencia pointed out that India's significant reduction in import taxes on gold and silver has boosted gold prices, which may boost retail demand.

Spot gold closed at $13.01 on Tuesday, up 0.54%, at $2409.16 per ounce.

Spot silver closed up 0.38% on Tuesday at $29.225 per ounce.

In addition to the news from India, the decline in US bond yields is also positive for the trend of gold.

Valencia said that gold prices recovered on Tuesday, driven by the decline in the yield of US treasury bond bonds. The yield of the US 10-year treasury bond bond fell 1.5 basis points to 4.24%, which is beneficial to gold. Traders are waiting for key US economic data, including June inflation and Q2 GDP, to assess the Fed's next move.

Pay attention to important data in the United States

Bart Melek, head of commodity strategy at TD Securities, said that the market focus has shifted from US politics to economic data and "assumes that interest rate cuts will begin in September".

According to the "Federal Reserve Watch" tool of Zhishang Institute, the market expects a 96% probability of the Federal Reserve cutting interest rates in September.

Due to the non interest bearing nature of gold, interest rate cuts can reduce the opportunity cost of holding gold, thereby enhancing its attractiveness to investors.

This week's focus will be on the release of the US Q2 GDP data on Thursday, as well as the latest Personal Consumption Expenditures (PCE) price index on Friday, which is the Federal Reserve's preferred inflation indicator.

Melek said that any weaker than expected PCE data would have a positive impact, mainly because the market would be more convinced that the Federal Reserve will start cutting interest rates in September.

Jim Wyckoff, senior market analyst at Kitco, said, "The overall technical outlook for gold remains bullish, which continues to attract speculators with technical skills to go long in the market, including buying trades when the market falls

How to trade gold?

FXStreet analyst Christian Borjon Valencia pointed out that the continuous decline in gold prices has ended, forming a "bullish pregnancy line pattern (Harami)", suggesting that gold prices may continue to rise in the near future. The relative strength index (RSI) is bullish, indicating that buyers are accumulating momentum, which may push up gold prices.

Valencia stated that in order to continue its bullish trend, gold prices need to break through $2412 per ounce. Once it breaks through this level, the next resistance level for gold prices will be $2450 per ounce, and then challenge the historical high of $2483 per ounce.

Afterwards, the gold price will target the integer level of $2500 per ounce.

Daily chart of spot gold

Valencia added that, on the contrary, if gold prices plummet below the July 22 low of $2384 per ounce, there may be a deeper correction. The next support level for gold prices will be the 50 day simple moving average (SMA) of $2359 per ounce.

Once the seller overcomes the 100 day moving average of $2315 per ounce, it is expected that the gold price will further decline towards $2300 per ounce.