GOLD Price Analysis – Aug 01, 2024
Daily Price Outlook
Gold prices (XAU/USD) failed to stop their early-day downward trend and remained well-offered around the 2,435 level, hitting an intra-day low of 2,430. This downward trend can be attributed to the renewed strength of the US dollar, which gained traction due to market expectations that the US economy remains robust, despite the Federal Reserve's dovish guidance on interest rates.
However, the expectation that the Fed will start lowering its key borrowing rates from September helped limit gold's deeper losses. Additionally, the widening Middle East conflicts were seen as another key factor that might help limit gold's losses.
US Dollar Strength and Economic Data Influence Gold Prices Amid Fed Rate Cut Expectations
On the US front, the broad-based US dollar has gained bullish traction, with the US Dollar Index (DXY) rebounding strongly to 104.20 from an intraday low of 103.86, making gold investments less attractive.
However, gold's broader appeal remains firm as US bond yields have tumbled, with 10-year US Treasury yields dropping to near a six-month low of 4.03% amid expectations that the Federal Reserve will start reducing interest rates from September.
This comes after the Fed's dovish guidance, leaving rates unchanged at 5.25%-5.50%, and signaling potential rate cuts due to cooling inflation and a moderating labor market.
On the data front, investors are focusing on the US ISM Manufacturing PMI report for July, expected at 14:00 GMT.
The PMI is anticipated to rise slightly to 48.8 from June’s 48.5, indicating continued contraction in manufacturing. Meanwhile, the Manufacturing Prices Paid index is predicted to grow more slowly at 51.8, suggesting cooling inflation.
Whereas, the key event for the FX market is the US Nonfarm Payrolls (NFP) report on Friday, with an expected hiring of 175K in July, down from 206K. The Unemployment Rate should hold steady at 4.1%, and wage growth is forecasted to slow to 3.7% annually.
Therefore, the rebound in the US dollar and upcoming economic data, like the ISM Manufacturing PMI and Nonfarm Payrolls report, could pressure gold prices. However, expectations of Fed rate cuts and lower US bond yields may support gold's appeal.
Middle East Tensions Boost Gold’s Safe-Haven Appeal Amid Rising Conflict
On the geopolitical front, escalating Middle Eastern conflicts have boosted gold's appeal as a safe-haven. However, the killing of a Hamas leader in Iran has raised fears of a broader conflict, increasing demand for gold.
Meanwhile, the UN Security Council held an emergency meeting amid rising tensions, with calls for peace from Palestine’s deputy UN representative and accusations from Iran against Israel.
In Gaza, an Israeli attack has resulted in deaths and injuries, adding to the already high toll of over 39,000 deaths and 91,000 injuries in the ongoing conflict.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is currently trading at $2,445.795, showing little change, but the metal remains poised for volatility given the current technical setup. On the 4-hour chart, gold hovers just below a critical pivot point at $2,450.64, a level that could signal a shift in momentum depending on the direction of the next breakout.
Immediate resistance lies at $2,467.87, followed by more formidable barriers at $2,483.50 and $2,503.94. These levels suggest potential zones where sellers might regain control. A sustained move above these resistances could attract momentum buyers, potentially propelling gold to new highs in the short term.
However, with the Relative Strength Index (RSI) at 71, gold is approaching overbought territory, indicating the possibility of a corrective pullback.
On the downside, immediate support is seen at $2,426.59, with additional supports at $2,404.15 and $2,380.90. These levels could serve as potential entry points for buyers should gold prices dip.
The 50-day Exponential Moving Average (EMA) at $2,399.53 suggests a bullish undertone, as the price remains above this moving average, indicating underlying buying interest.
Traders might consider entering a short position below the pivot point of $2,450, targeting a take profit at $2,425. Given the proximity to resistance and the overbought conditions, a stop loss at $2,468 would help manage risk.
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