Gold prices surged on Monday, with XAU/USD trading in the $2,520s, just below its record high of $2,531. This surge is attributed to growing safe-haven demand as geopolitical tensions in the Middle East rise. Investors also anticipate that US interest rates will decrease in the medium to long term, making gold a more attractive investment option.
Strong US Durable Goods Orders and Their Impact
During the US session, Durable Goods orders for July showed a remarkable 9.9% increase, a stark contrast to the previous month’s 6.9% decline. This increase exceeded the expected 4.0% rise and marked the largest gain since May 2020. This data suggests that the US economy is more resilient than anticipated, despite prevailing pessimism. Although gold momentarily dipped following the release, it quickly recovered and continued to trade in the $2,520 range.
Gold Gains on Safe-Haven Demand
As tensions rise in the Middle East, investors are seeking safer assets, with gold being a prime choice. Over the weekend, Israel launched pre-emptive strikes on Hezbollah positions in Lebanon, triggering retaliatory attacks. Concerns about Iran’s potential involvement add to the heightened risks, further driving demand for gold.
Powell’s Speech Fuels Gold Rally
Gold gained over 1% on Friday after Federal Reserve Chairman Jerome Powell’s speech at the Jackson Hole symposium. Powell signaled that the Fed may cut interest rates soon, noting that the labor market is slowing due to high interest rates, which have been in place since July 2023. While these rates have curbed inflation, they are now negatively affecting employment.
Powell’s comments caused US government bond yields to drop, making gold more appealing as it reduces the opportunity cost of holding non-interest-bearing assets like gold. The US Dollar Index (DXY), which is inversely related to gold prices, also hit a new low of 100.53 on Monday, further boosting gold’s appeal.
Technical Analysis: Gold’s Continued Uptrend
Gold remains in an uptrend despite recent sideways trading. After breaking out of its previous range on August 14, the next upside target is around $2,550. This target is based on technical analysis principles, using the 0.618 Fibonacci ratio of the range’s height.
A break above the all-time high of $2,531 could confirm further gains toward the $2,550 target. Conversely, a close below $2,470 (the low from August 22) could negate this bullish outlook and challenge the uptrend. However, on both medium and long-term timeframes, gold’s broader uptrend remains intact, supporting a positive outlook for the metal.
Conclusion: Gold’s Strong Outlook Amid Rising Risks
Gold continues to attract investors as geopolitical risks increase and expectations for a Federal Reserve rate cut rise. The precious metal remains in an uptrend, with potential for further gains if current trends persist.
For more insights and daily updates, visit Daily Gold Signal. For detailed gold price trends, check out our Daily Gold Update.
