GOLD Price Analysis – Aug 02, 2024
Daily Price Outlook
Gold price (XAU/USD) prolonged its previous upward trend and drew further bids around the 2,464 level, reaching an intraday high of $2,468. This rebound can be attributed to speculation that the Federal Reserve may begin reducing interest rates in September.
This undermined the US dollar and contributed to the gold price gains. Meanwhile, the risk-off market sentiment driven by growing concerns about the US economy and escalating geopolitical tensions in the Middle East was seen as another key factor that boosted the gold price.
Looking ahead, traders are awaiting upcoming US labor market data, including Nonfarm Payrolls and Average Hourly Earnings for July. The official Employment data will indicate the current status of the labor market, which will influence market speculation for a US Federal Reserve (Fed) rate cut in September.
The US NFP report is expected to show that 175K new workers were hired in July, a decrease from the previous addition of 206K. The Unemployment Rate is expected to remain steady at 4.1%.
US Economic Concerns and Dovish Fed Policy Bolster Gold's Appeal
On the US front, the previously released manufacturing and employment data raised concerns about the economy, boosting risk aversion and supporting gold. Meanwhile, the yellow metal gained further traction due to dovish sentiment surrounding the Federal Reserve's policy.
The Fed kept rates unchanged at 5.25%-5.50% in July and signaled potential rate cuts due to cooling inflation and a moderating labor market. This pressured the US dollar and contributed to gold's gains, as lower interest rates tend to increase the appeal of non-yielding assets like gold.
On the data front, the US ISM Manufacturing PMI dropped to an eight-month low of 46.8 in July, down from 48.5 and below the expected 48.8. Additionally, US Initial Jobless Claims for the week ending July 26 rose to 249K, exceeding the forecast of 236K and the previous week's 235K.
The official Employment data will indicate the current status of the labor market, influencing market speculation for a Fed rate cut in September. The US NFP report is expected to show that 175K new workers were hired in July, a decrease from the previous addition of 206K, while the Unemployment Rate is expected to remain steady at 4.1%.
Investors will also focus on the Average Hourly Earnings data, a key measure of wage growth that fuels consumer spending and drives price pressures.
Annually, wage growth is estimated to have decelerated to 3.7% from the prior reading of 3.9%, with the monthly figure growing steadily by 0.3%. Softer-than-expected wage growth data will diminish fears of persistent inflation, strengthening Fed rate-cut prospects, while stubborn numbers would weaken them.
Thus, the concerns over US manufacturing and employment, dovish Fed policy, and expectations of rate cuts due to cooling inflation and moderating labor market support gold, increasing its appeal as a non-yielding asset.
Rising Middle East Tensions Boost Gold Demand Following Assassination of Hamas Leader
On the geopolitical front, the geopolitical tensions in the Middle East have recently fueled a rise in gold prices. The assassination of Hamas leader Ismail Haniyeh in Tehran, following his attendance at the new president's inauguration, has intensified these tensions.
The New York Times reports that Haniyeh was killed in the Iranian capital, with both Iranian officials and Hamas accusing Israel of orchestrating the attack. This escalation has further bolstered gold's appeal as a safe-haven asset.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is currently trading at $2,464.83, up 0.45%, as investors look for safe-haven assets amid global economic uncertainties. The 4-hour chart shows that gold has breached key resistance levels, indicating bullish momentum.
The immediate resistance is at $2,469.89, followed by $2,483.50 and $2,503.94. If gold manages to break above these levels, it could potentially test higher targets.
On the downside, immediate support is seen at $2,430.57, with subsequent support at $2,408.91 and $2,386.97. A decline below these levels might trigger a bearish trend, but the overall outlook remains positive as long as gold stays above the pivot point of $2,483.00.
The RSI stands at 72, signaling that the metal is currently overbought, which could lead to a short-term correction before further gains.
The 50-day Exponential Moving Average (EMA) at $2,405.75 further supports the bullish trend. This indicator highlights strong buying interest and suggests that the uptrend might continue, especially if macroeconomic conditions continue to favor risk-averse investments.
In terms of trading strategy, an entry price is recommended above $2,455, with a target take-profit level at $2,483 and a stop-loss set at $2,433. This approach aims to capitalize on the current bullish sentiment while managing risk effectively.
Investors should remain cautious, as geopolitical tensions and economic data releases could influence gold prices.
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