GOLD Price Analysis – Aug 06, 2024
Daily Price Outlook
Gold price (XAU/USD) trimmed its losses and regained some its bullish traction around the 2,411 level, hitting the intra-day high of 2,418 level.
However, the reason for its mild bullish trend can be associated with expectations for larger interest rate cuts by the Federal Reserve, which may keep US bond yields and the Greenback subdued.
Meanwhile, the ongoing geopolitical risks in the Middle East could support higher gold prices, limiting recent declines.
US Economic Data and Federal Reserve Speculation Affect Gold Prices Amid Mixed Market Reactions
On the US front, the broad-based US dollar and Treasury yields have been impacted by recent economic data showing sharper-than-expected declines in manufacturing activity and slower job growth.
This has raised concerns about a potential recession and led to speculation that the Federal Reserve might cut interest rates more aggressively.
As a result, the yield on the 10-year US Treasury bond fell to its lowest level since mid-2023, with traders predicting a high chance of a 50-basis points rate cut in September.
Despite these developments, San Francisco Fed President Mary Daly reassured that a slowing job market isn't a major concern and that rates will decrease to balance employment and price stability.
Consequently, the market's risk-on sentiment, coupled with rising Treasury yields and a modest increase in the US dollar, hasn't significantly boosted gold's appeal or attracted many buyers during the Asian session on Tuesday.
On the data front, Tuesday's positive US Services PMI report, which improved to 51.4 in July from 48.8, surpassing expectations of 51, was largely overshadowed by broader economic concerns.
This includes fears of a recession and speculation about more aggressive Federal Reserve rate cuts.
Middle East Conflicts Boost Gold Prices Amid Rising Tensions and Humanitarian Crisis
On the other hand, the conflicts in the Middle East are likely to push up gold prices as a safe investment.
Iran, Hamas, and Hezbollah have vowed to retaliate against Israel for killing Hamas leader Ismail Haniyeh in Tehran, increasing tensions. Recent violence in Gaza has resulted in at least 40 deaths and 71 injuries.
Meanwhile, child malnutrition has also risen by nearly 50% from June to July. The UN is calling for de-escalation to prevent further conflict.
Additionally, nearly 90 unidentified Palestinian bodies previously held by Israel have been returned to Gaza for burial.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is trading at $2,413.43, down 0.09% as the market reflects cautious sentiment amid global economic uncertainty.
The 4-hour chart shows the price has fallen below the pivot point of $2,437.41, signaling a bearish trend in the short term. Immediate resistance is at $2,452.64, with further resistance at $2,477.89 and $2,498.73.
These levels must be breached for gold to regain upward momentum. On the downside, immediate support is at $2,394.93, with subsequent support levels at $2,374.89 and $2,353.65.
The Relative Strength Index (RSI) is currently at 47, indicating that the market is neither overbought nor oversold.
This suggests a period of consolidation as traders await clearer market signals. Meanwhile, the 50-day Exponential Moving Average (EMA) is at $2,409.23, slightly below the current price.
This position of the EMA suggests that gold is experiencing short-term selling pressure, yet remains close enough to suggest that a rebound is possible if broader market conditions improve.
From a technical perspective, the entry strategy for traders is to consider buying above $2,400, with a target take-profit level at $2,437. A stop-loss should be set at $2,372 to protect against downside risk.
Related News
USD/CAD Price Analysis – Aug 06, 2024
JOIN LONGHORNFX TODAY
24/7 live support, lightning fast withdrawals, guaranteed safe and reliable trading platforms with a true ECN broker.