Gold price (XAU/USD) fell slightly to the $2,510s on Tuesday as easing tensions in the Middle East reduced the metal’s appeal as a safe haven. This came after a missile exchange between Israel and Hezbollah did not escalate, though concerns about Iran’s potential involvement remain.
The decline in gold price may also be attributed to stronger-than-expected US Durable Goods Orders data, which showed a 9.9% increase in July—the highest level since May 2020. This robust data alleviated some fears about the US economy, reducing expectations that the Federal Reserve (Fed) will need to cut interest rates aggressively to prevent a hard landing.
The likelihood of the Fed making a significant 0.50% rate cut in September has decreased to below 30%, down from around 35% after Fed Chairman Jerome Powell hinted at upcoming cuts during his speech in Jackson Hole last Friday.
Gold declines amid weaker safe-haven demand and robust US data
Gold price edged lower on Tuesday as demand for safety assets eased. US Air Force General C.Q. Brown, chairman of the Joint Chiefs of Staff, indicated that fears of a broader Middle East conflict between Israel and Hezbollah have diminished due to the lack of escalation. However, General Brown warned that Iran remains a significant threat as it considers striking Israel.
Gold poised for medium-term gains, but correction risks persist – TD Securities
Gold price is expected to rise further, but a sharp pullback is also possible due to heavy long positions, according to Bart Melek, Head of Commodity Strategy at TD Securities.
Melek suggests that while gold may see more upside in the coming months, strong long positions pose a short-term correction risk. He warns that strong employment data or other factors reducing the likelihood of rate cuts could trigger profit-taking and a significant correction.
Technical Analysis: Gold holds steady above previous range’s upper boundary
Gold (XAU/USD) continues to trade above support from its previous range’s top, maintaining its short-term uptrend. Despite recent sideways movement, the trend still favors buyers over sellers.
The breakout of the range on August 14 suggested an upside target of around $2,550, based on the 0.618 Fibonacci ratio. A break above the all-time high of $2,531 from August 20 would confirm a continuation towards the $2,550 target.
Alternatively, a close below $2,470 (the August 22 low) would negate the upside target and raise doubts about the short-term uptrend. However, gold remains in a broad uptrend on both medium and long-term timeframes, supporting a generally bullish outlook.
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