The gold price (XAU/USD) remains under pressure, struggling to gain momentum as the US dollar experiences a modest recovery. On Tuesday, traders awaited fresh catalysts that could provide direction. However, US Federal Reserve (Fed) Chair Jerome Powell’s signal from Jackson Hole, indicating potential interest rate cuts, is likely to offer support for the precious metal. Lower interest rates tend to benefit gold as they decrease the opportunity cost of holding non-yielding assets.
Additionally, escalating geopolitical tensions in the Middle East could further boost gold’s appeal as a safe-haven asset. Meanwhile, the People’s Bank of China (PBOC) has halted gold purchases for the third consecutive month, creating uncertainty about future demand. China’s August data will be closely watched for signs of change.
Impact of US Data and Geopolitical Factors on Gold Price
The US Conference Board’s Consumer Confidence report for August and the Housing Price Index for June are scheduled for release on Tuesday. Later this week, traders will focus on preliminary US Gross Domestic Product (GDP) data and the Personal Consumption Expenditures (PCE) Price Index, both of which are expected to influence market sentiment.
On the geopolitical front, US Air Force General C.Q. Brown indicated a reduction in fears of a broader Middle East conflict after Israel and Lebanon’s Hezbollah exchanged fire without further escalation. However, General Brown warned that Iran still poses a significant threat, particularly regarding a possible strike on Israel. Meanwhile, Hamas has rejected new Israeli conditions in ceasefire talks, further adding to regional uncertainty.
Federal Reserve’s Influence on Gold Price
Fed officials have been vocal about the need for rate cuts. Mary Daly, President of the San Francisco Fed, expressed that it’s appropriate to start reducing interest rates. Similarly, Richmond Fed President Thomas Barkin has adopted a cautious approach, emphasizing the need to test and learn as inflation decreases. Fed Chair Powell also highlighted the importance of policy adjustments, signaling a more flexible stance on rates.
Technical Analysis: Gold’s Broader Bullish Outlook Remains Intact
Despite its recent decline, the broader bullish outlook for gold remains intact. The precious metal continues to be supported above the 100-day Exponential Moving Average (EMA) on the daily chart. The 14-day Relative Strength Index (RSI) also indicates strength, holding above the midline near 92.95.
If gold breaks through resistance in the $2,530-$2,540 range, it could aim for the $2,600 psychological barrier. However, a drop below $2,470 could trigger further selling, with the next support zone at $2,432, followed by a key level at $2,360-$2,370.
Conclusion
In conclusion, while the gold price struggles to gain ground amid a stronger US dollar, the potential for rate cuts and ongoing geopolitical tensions may provide support in the near term. Traders will keep a close eye on upcoming US data releases and developments in the Middle East.
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