Gold prices (XAU/USD) have started to climb again after hitting recent lows below $2,500 per troy ounce. This increase is due to expectations that the US may cut interest rates soon. When interest rates are lower, gold becomes more attractive since it doesn’t offer any interest or dividends. Additionally, political uncertainty in the US, tensions in the Middle East, and concerns about the global economy are helping gold prices rise.
How the US Dollar Affects Gold Prices
However, a stronger US Dollar (USD) could hold back gold’s gains. Since gold is priced in USD, a stronger dollar makes it more expensive for buyers using other currencies. Investors are paying close attention to the upcoming US Gross Domestic Product (GDP) data for the second quarter, which could influence future interest rate decisions by the Federal Reserve (Fed). The US Personal Consumption Expenditures (PCE) Price Index data, expected on Friday, will also play a significant role in shaping market expectations.
Fed Rate Cuts and Their Impact on Gold
According to the CME FedWatch Tool, the market expects a 25 basis points (bps) interest rate cut in September, with a 36.5% chance of a bigger cut. Traders also believe that the Fed might reduce rates by 100 bps this year. These expectations are pushing gold prices higher since lower interest rates usually weaken the dollar and make gold more appealing.
Gold’s Positive Technical Outlook
The technical outlook for gold remains positive. The precious metal is trading in a good position, though it faces resistance at the top of a five-month rising channel and near its all-time high. Despite this, the overall trend is still upward, with prices staying above the important 100-day Exponential Moving Average (EMA).
The 14-day Relative Strength Index (RSI) is also above the midline at around 61.00, signaling potential for more gains. The $2,530-$2,535 range is a key resistance level. If gold prices break through this range, they could head towards the $2,600 mark.
Key Support Levels and Potential Risks
On the downside, the first support level for XAU/USD is at $2,500. If prices fall below this level, it could lead to a decline towards $2,432, which was the low on August 15. The next important support is at $2,367, near the 100-day EMA.
In summary, the gold market is influenced by US economic data and global events. Investors should keep an eye on the upcoming US GDP report and PCE Price Index, as these will provide important clues about the Federal Reserve’s next moves. For more updates on gold prices, visit our Daily Gold Update.
For additional insights and market analysis, check out our Daily Gold Signal.
