The gold price dips (XAU/USD) showed positive movement on Tuesday despite a weakening US Dollar. Last week’s strong US Purchasing Managers Index (PMI) has led Federal Reserve officials to delay the anticipated interest rate cut. This decision has limited gold’s upward potential. However, ongoing geopolitical tensions in the Middle East and Ukraine might drive demand for the safe-haven asset in the near future.
Key Influences on Gold Price
Investors are keenly watching speeches from Federal Reserve members Lisa Cook and Michelle Bowman on Tuesday. Additionally, significant US economic data will be released this week, including the final Q1 US Gross Domestic Product (GDP) figures on Thursday and May’s Personal Consumption Expenditure (PCE) Price Index on Friday. If inflation shows signs of easing, it might increase expectations for Fed rate cuts later in 2024. This could weaken the US Dollar and create a favorable environment for USD-denominated gold.
Market Dynamics and Fed Insights
Mary Daly, President of the San Francisco Federal Reserve Bank, stated that rate cuts should only be considered once inflation is clearly moving towards 2%. She also mentioned potential unemployment risks if inflation persists. The final reading for the PCE Price Index is expected to show a 2.6% year-on-year increase in May. Currently, traders estimate a 66% probability of a Fed rate cut in September, up from 59.5% last week, according to the CME FedWatch Tool.
Geopolitical Developments
Geopolitical tensions remain high. Israeli Prime Minister Benjamin Netanyahu indicated that the most intense phase of the conflict against Hamas in Gaza is nearing an end, although the broader war continues. Meanwhile, Russia has criticized the US for a missile strike in Crimea, accusing it of a “proxy war” and promising retaliation. This ongoing instability could influence safe-haven demand for gold.
Technical Analysis: Short-term Pressure
Gold price dips are currently under short-term downward pressure. The metal has been trading within a descending trend channel since May 10. Despite this, gold remains above the key 100-day Exponential Moving Average (EMA), suggesting a potential for consolidation. The 14-day Relative Strength Index (RSI) near the 50-midline reflects a neutral stance.
The first resistance level is at $2,350, with a break above potentially leading to $2,387 and further to the all-time high of $2,450. On the downside, support is at $2,316, with further declines possibly reaching $2,285 and the critical $2,255-$2,260 zone, marked by the 100-day EMA.
US Dollar Performance
In the past seven days, the US Dollar has shown varied performance against major currencies. It was strongest against the Japanese Yen. This dynamic can be analyzed using a heat map that tracks percentage changes between major currencies.
Conclusion
The gold market is closely tied to Federal Reserve policies and geopolitical developments. Investors should monitor economic data and Fed statements for clues about future rate cuts, which will influence gold prices. For more detailed updates on gold prices, visit Daily Gold Signal. For regular gold market updates, check out Daily Gold Update.
