The gold price (XAU/USD) has been experiencing a rebound, reaching a new weekly high during the Asian session. This recovery, from the previous week’s low, has been driven by several supportive factors. A decrease in risk appetite in global equity markets has led investors to seek refuge in gold, boosting its value. Additionally, the US Dollar’s slight pullback from a two-week high has further supported this upward movement for the precious metal.
Market Factors Influencing Gold Price
Growing expectations that the Federal Reserve (Fed) might start reducing interest rates in September have contributed to the selling of the US Dollar. Political developments in the US are also influencing this trend, creating a favorable environment for gold prices. However, traders remain cautious, awaiting more information on the Fed’s future policy decisions. Key data releases, such as the US Q2 GDP and the US Personal Consumption Expenditures (PCE) Price Index, are expected on Thursday and Friday, respectively. Until then, the focus will be on the global PMI data for short-term market insights.
Gold Price Drivers
On Tuesday, a drop in US Treasury yields, coupled with reduced risk appetite, provided positive momentum for gold prices. US existing home sales fell by 5.4% in June, hitting the lowest level since December. This unexpected decline was reported by the National Association of Realtors. Meanwhile, a survey by the Federal Reserve Bank of Richmond revealed a worsening manufacturing activity, with the index falling to -17 in July from -10 in the previous month. Vice President Kamala Harris’s clinching of the Democratic nomination prompted a re-evaluation of previous market positions, affecting US bond yields.
Investors now widely anticipate that the US central bank will begin cutting interest rates in September, possibly implementing two more reductions by the end of the year. This scenario supports gold prices, although ongoing US Dollar buying limits further gains. Traders await crucial US economic data to determine future trends in XAU/USD. The release of US GDP figures for the second quarter and June’s PCE Price Index will offer insights into the Fed’s interest rate strategy, influencing USD dynamics and potential gold price movements. Additionally, Wednesday’s flash PMI data will provide clues about the global economic health, offering short-term trading opportunities in gold.
Technical Analysis: Gold Price Outlook
From a technical standpoint, the recent bounce from the $2,385 level, aligning with the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 50% retracement of the June-July rally, suggests caution for bearish traders. This area now serves as a crucial pivot point; a decisive break below it could lead to significant declines. If breached, gold might slide to the 61.8% Fibonacci retracement level, around $2,366-$2,365, and potentially further to the $2,352-$2,350 zone before reaching the 78.6% Fibonacci level near $2,334 and the $2,300 mark.
Conversely, an upward movement might face resistance near the $2,417-$2,418 range. A breakthrough here could trigger a short-covering rally, pushing gold prices to the $2,437-$2,438 region. Sustained buying beyond this level would indicate the recent downward trend has ended, favoring bullish traders. The momentum could extend, aiming to retest the all-time high near $2,482 reached on July 17, with some intermediate resistance around the $2,458 area.
The gold price continues to react to broader market dynamics, including US economic indicators and Fed policy expectations. For more insights and updates, visit Daily Gold Signal and explore our Daily Gold Update for expert analysis and predictions.
