Gold prices, shown as XAU/USD, continue to stay low as the European session starts on Tuesday. Right now, it’s hovering close to the lowest point it reached today, just above $2,320. Why? Well, investors are thinking that the Federal Reserve (Fed), which controls interest rates, won’t be cutting rates anytime soon. This thinking got stronger after seeing the US Personal Consumption Expenditures (PCE) Price Index released last Friday, which showed that inflation is not going down easily. When investors expect the Fed to keep rates steady or even raise them, they tend to favor the US Dollar (USD). This preference for the USD is causing money to move away from gold, which doesn’t give any interest, hence pushing its price down.
Even though gold prices are feeling the pressure, there’s a chance they might get a little boost if US stock futures show a slightly weaker trend. Also, traders might not want to take big risks right now because there are important events coming up this week, like central bank meetings and important US economic reports, especially the Nonfarm Payrolls (NFP) report, which many people watch closely. These events could give us a better idea of what the Federal Reserve might do with interest rates, which in turn can affect gold prices since gold doesn’t pay any interest. Meanwhile, keep an eye out for the Chicago PMI and the Consumer Confidence Index from the Conference Board, as they could create some short-term trading opportunities.
Market Movements: Gold Price Squeezed by Slight USD Strength and Upbeat Fed Outlook
- US Inflation Stays High: The release of the US Personal Consumption Expenditures (PCE) Price Index on Friday showed that inflation is still high. This makes people think that the Federal Reserve might start lowering interest rates in September.
- Strong US Dollar: Because people expect the Fed to take action to control inflation, they think the US Dollar will get stronger. This, along with a generally positive mood in the financial markets, makes it harder for the price of gold, which doesn’t pay interest, to go up.
- Global Situation: Worries about more problems between Iran and Israel are going down, and there’s hope for peace talks between Israel and Hamas. This makes investors feel better about taking risks in the global markets.
- Waiting Game: Traders are playing it safe and not making big bets until they see what the central banks (like the Federal Reserve) decide and how the US economy is doing. They want to see what the Fed says about interest rates and also what the US jobs report looks like.
- Upcoming Events: The Fed will make an announcement about its plans on Wednesday after a two-day meeting. Then, on Friday, there will be an important report about jobs in the US. Investors will watch these events closely to see what they mean for the US Dollar and for gold prices.
- Other Data: Before the big events, there are some other reports coming out on Tuesday that might also affect the markets, like the Chicago PMI (a measure of business activity in the Chicago area) and the Consumer Confidence Index (a measure of how confident consumers feel about the economy).
If the support level of $2,320 is broken strongly, technical analysis suggests that the price of gold might aim for the lowest point it reached last week. This means that if gold falls below $2,320 and stays there, it could continue dropping towards the recent lowest price point.
In the last couple of days, the price of gold has been having trouble getting past a certain level, called the 200-hour Simple Moving Average (SMA). Right now, this level is around $2,346. This spot also matches up with something called the 38.2% Fibonacci retracement level, which is a way of measuring how much the price has pulled back from its highest point. If the price manages to go beyond this level, it could go up to around $2,352-2,353 next. After that, it might aim for around $2,371-2,372. If it keeps going up, it could eventually reach $2,400, and even higher to the all-time high it hit earlier this month, around $2,431-2,432.
But if the price falls below another level, called the 100-hour SMA, it could mean more selling and the price might drop to around $2,292-2,291, which is where it was at its lowest point last week. If it keeps falling, it could go down even more to around $2,320 and then possibly to $2,268-2,265.
