The gold price gains (XAU/USD) experienced fresh buying interest after a period of range-bound activity, climbing to $2,365, its highest level since June 21, during Friday’s Asian session. This rise is fueled by market expectations of a potential interest rate cut by the Federal Reserve (Fed) in September and December due to recent softer US macroeconomic data. As a result, the US Dollar (USD) has weakened, providing support for gold.
Gold Price gains Influences
Fed Rate Cut Expectations
The possibility of the Fed initiating a rate cut cycle in September has put pressure on the USD for the fourth consecutive day. This sentiment has bolstered gold prices as investors seek refuge in non-yielding assets. Recent US economic data indicates a slowing labor market and reduced economic momentum, further supporting the likelihood of rate cuts.
Market Dynamics
Despite the bullish outlook for gold, the current risk-on environment may limit significant price increases. Traders are likely to adopt a cautious approach ahead of the US monthly employment data release, known as the Nonfarm Payrolls (NFP) report. This report is crucial as it shapes expectations for future Fed policy decisions, impacting USD demand and, consequently, gold prices.
Daily Digest Market Movers
Sustained USD Selling
Ongoing expectations for Fed rate cuts have contributed to sustained selling of the USD, underpinning gold prices. The recent softer US macroeconomic releases, highlighting labor market weaknesses and economic deceleration, have reinforced this trend. However, hawkish comments from Fed officials and June’s FOMC policy meeting minutes indicate a lack of consensus on lowering lending rates.
Equity Market Sentiment
The bullish sentiment in global equity markets has tempered enthusiasm for gold, a traditional safe-haven asset. With the highly anticipated US employment data due soon, traders are hesitant to make aggressive bullish bets on gold. The NFP report, expected to show an addition of 190K jobs in June and a steady unemployment rate of 4%, along with modest wage growth, will be pivotal in shaping market expectations.
Technical Analysis
Bullish Indicators
Technically, gold’s sustained breakout above the 50-day Simple Moving Average (SMA) is a positive sign for bullish traders. Daily chart oscillators indicate upward momentum, suggesting the path of least resistance for gold is higher. A continued rise beyond the $2,365 area would solidify this outlook, potentially pushing gold towards the $2,400 mark and challenging the all-time high of $2,450.
Support Levels
Conversely, a decline towards the 50-day SMA resistance, around $2,339-$2,338, could present a buying opportunity. Further support is seen near the $2,319-$2,318 region. A decisive break below these levels might expose gold to additional downside risks, testing support at $2,285 and potentially falling towards the 100-day SMA near $2,258, with further downside to $2,225-$2,220 and ultimately $2,200.
Conclusion
Gold prices are poised for a second consecutive week of gains, driven by expectations of Fed rate cuts and recent USD weakness. The upcoming US NFP report will be crucial in determining near-term market direction. For more insights on gold price trends, visit Daily Gold Signal and for daily updates, check out our Gold Update.
