Gold Price Tests Multi-Day Low (XAU/USD) has dropped further in the European session on Friday. It is now near a multi-day low around $2,420. The US Dollar (USD) has been recovering from a four-month low, impacting gold prices for the third day in a row. Additionally, some profit-taking after a recent 6.5% rally is adding to the decline. Despite this, the drop seems to have a limit.
Market Overview
Gold Price Decline and USD Strength
The recent strength of the USD is a major reason for the falling Gold Price Tests Multi-Day Low Investors expect the Federal Reserve (Fed) to start cutting interest rates in September and possibly make two more cuts by the end of the year. This expectation keeps US Treasury bond yields low, which might cap further gains for the USD. The risk-off mood could boost gold prices, while geopolitical tensions and central bank buying might prevent significant drops.
Impact of US Economic Data
The US Bureau of Labor Statistics (BLS) reported an increase in unemployment benefits claims. The four-week moving average has risen to its highest level in over two and a half years, suggesting a softer job market. This, combined with lower inflation, hints at the Fed starting to cut rates soon. Despite strong US manufacturing data, markets are betting on a rate cut in September and possibly more cuts by year-end.
Geopolitical Tensions
Former President Donald Trump’s comments about Taiwan and ongoing conflicts in the Middle East and Ukraine are adding to global uncertainties. These issues are likely to support gold prices despite the current downward trend.
Technical Analysis
Key Support and Resistance Levels
Technically, the next support for gold is around $2,413-2,412, followed by $2,400. If gold drops below $2,390-2,385, it could lead to more selling, possibly pushing prices down to the 50-day Simple Moving Average (SMA) near $2,359-2,358. If the weakness continues, the 100-day SMA at $2,311 could come into play, with intermediate support around $2,330-2,328.
Potential Upside
On the upside, gold faces immediate resistance at the Asian session high around $2,445. If it breaks this level, it could rise to $2,469-2,470. Since daily chart indicators are positive, gold might aim to retest the all-time high near $2,483-2,484 and possibly reach the $2,500 mark.
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