Gold price have shown a strong tendency to remain stable around $2,500 during the early European session on Monday. Despite a cautious market, gold manages to stay above this critical level, close to its all-time high. The anticipation that the Federal Reserve (Fed) will begin lowering interest rates in September has contributed to a drop in U.S. Treasury bond yields. This situation has weakened the U.S. Dollar (USD), giving a boost to gold, which does not offer any yield.
Factors Supporting Gold Price
Gold price attractiveness is also supported by ongoing geopolitical tensions in the Middle East and the prolonged conflict between Russia and Ukraine. These factors contribute to a cautious approach among traders, who are hesitant to make new moves without further clarity on the Fed’s rate-cut strategy. Market participants are now focused on the upcoming release of the Federal Open Market Committee (FOMC) meeting minutes on Wednesday, as well as Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium.
Market Influencers: Fed Expectations and Geopolitical Tensions
The expectation of a dovish Fed stance and rising geopolitical tensions pushed gold prices to new highs, surpassing the $2,500 mark last Friday. Recent data, including the U.S. Producer Price Index and Consumer Price Index, indicate that inflation is decreasing. This trend supports the likelihood of a 25-basis-point rate cut by the Fed in September. These developments overshadowed positive U.S. Retail Sales data, easing fears of a recession and drawing sellers back to the USD.
U.S. Economic Indicators and Gold’s Performance
The University of Michigan’s preliminary report revealed an improvement in U.S. Consumer Sentiment for the first time in four months, rising to 67.8 in August. The report also showed that inflation expectations for the next year remain steady at 2.9%, while the five-year outlook has stayed unchanged at 3% for five consecutive months. These findings did little to boost the USD, as the market anticipates the Fed will soon begin easing its monetary policy, which continues to drive interest in gold.
Technical Outlook: Gold’s Path Forward
From a technical perspective, the recent breakout above the $2,470-2,472 resistance level on Friday, coupled with the push beyond the previous all-time high, signals a bullish outlook for gold. The daily chart’s oscillators are still in positive territory and not yet overbought, suggesting that gold could continue its upward trend. However, caution is advised until there is sustained buying momentum beyond the $2,510 level.
On the downside, the $2,472-2,470 area now serves as a key support level. If gold prices fall further, they are expected to attract buyers around the $2,448-2,446 region. A decisive break below this level could lead to a more significant decline, potentially down to the 50-day Simple Moving Average (SMA) near $2,388-2,387, with some intermediate support around the $2,400 mark.
Conclusion
The gold market remains focused on upcoming Fed announcements and global geopolitical developments. Investors are closely watching for signals that could influence gold prices in the near term.
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