Gold price faces challenges (XAU/USD) have been struggling to gain momentum in recent trading sessions. Although there was a brief uptick during the Asian session on Tuesday, the prices managed to stay above a one-week low seen earlier. The decision of U.S. President Joe Biden to withdraw from the 2024 Presidential race has increased the likelihood of Donald Trump becoming the next President, sparking hopes for a more relaxed regulatory environment. In addition, the People’s Bank of China’s unexpected interest rate cuts on Monday have supported a positive market sentiment, serving as a hindrance for gold, a traditional safe-haven asset.
Market Dynamics Influencing Gold Price Challenges
Expectations of a dovish Federal Reserve policy may limit the losses for non-yielding gold. Many market participants believe the Fed will start reducing borrowing costs in September, with the possibility of two more rate cuts by the end of the year. This has led to a decline in U.S. Treasury bond yields, putting pressure on the U.S. Dollar (USD) and providing some support to gold. Given these factors, it is wise to await further market developments before predicting any extension of the recent gold price pullback.
Influence of U.S. Economic Data on Gold Prices
Money markets have already priced in a Federal Reserve rate cut for September, which has weakened the U.S. Dollar and supported gold. Traders will be watching Tuesday’s U.S. economic reports, including Existing Home Sales and the Richmond Manufacturing Index, for short-term market cues. The main focus, however, will be on Thursday’s U.S. Q2 GDP report and Friday’s U.S. Personal Consumption Expenditures (PCE) Price Index data. Investors will also review flash PMIs this week to assess global economic health and its impact on gold prices.
Technical Analysis: Gold’s Potential Price Movements
Technically, gold prices are finding support near the $2,385 level, which aligns with the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 50% retracement level of the June-July rally. This area is crucial; if broken, it could lead to further losses. Gold might then slide to the 61.8% Fibonacci level, around $2,366-$2,365, heading towards $2,352-$2,350 before potentially dropping to the 78.6% Fibonacci level, near $2,334, and the $2,300 mark.
On the upside, any further increase is expected to encounter resistance near the $2,417-$2,418 zone. A strong breakthrough here could drive gold prices towards $2,437-$2,438. Sustained strength beyond this level may indicate the end of the corrective decline, shifting the near-term bias towards bullish traders. This could propel XAU/USD back to its all-time high, around $2,482, observed on July 17, with some resistance near $2,458.
Gold prices are currently navigating a complex landscape influenced by global economic and political factors. With upcoming U.S. economic data releases, investors will be keenly observing market trends. For more detailed daily updates on gold prices, visit Daily Gold Signal and check out their daily gold updates for comprehensive insights.
