GOLD Price Analysis – Aug 07, 2024
Daily Price Outlook
Gold price (XAU/USD) maintained its early-day upward momentum and drew further bids around the 2,395 level, hitting an intra-day high of 2,397.
This rally was driven by weaker-than-expected US economic data, suggesting a faster-than-anticipated slowdown in the world's largest economy.
Economic uncertainty has fueled speculation about larger interest rate cuts by the Federal Reserve, which benefits non-yielding assets like gold.
Apart from this, concerns about an economic slowdown in China and potential escalations in geopolitical tensions in the Middle East have further bolstered gold's appeal as a safe-haven asset.
US Economic Slowdown and Federal Reserve Rate Cut Speculations Boost Gold Prices
On the US front, the broad-based US dollar failed to sustain its early-day bullish momentum and turned bearish as softer economic data suggested the world's largest economy was slowing faster than expected.
This led to speculation about bigger interest rate cuts by the Federal Reserve, which supports the non-yielding yellow metal (gold).
Government data released on Tuesday showed that the US trade deficit fell by 2.5% to $73.1 billion in June from $75.0 billion in May, mainly due to a 1.5% rise in exports of aircraft and US-produced oil and gas.
Markets are now pricing in a 100% chance that the Federal Reserve will start lowering borrowing costs at the upcoming policy meeting in September, with a near 70% probability of a 50-basis-point rate cut.
Therefore, this speculation about bigger interest rate cuts by the Federal Reserve supports gold prices, as lower rates reduce the opportunity cost of holding non-yielding assets like gold.
Geopolitical Tensions and Economic Concerns Bolster Gold Prices Amid Middle East Conflict and Chinese Slowdown
On the geopolitical front, the increasing concerns about an economic slowdown in China and rising tensions in the Middle East provide additional support for gold prices.
However, the latest reports indicate Hezbollah has launched multiple drones into Israel, hitting several areas and triggering air raid sirens. In response, Israeli forces have conducted raids in the West Bank, resulting in at least 12 Palestinian deaths.
It is also worth mentioning that Yahya Sinwar has been named the new Hamas chief following the assassination of Ismail Haniyeh.
Gaza's Health Ministry reports that recent Israeli attacks have killed at least 40 people and injured 71. Overall, Israel's war on Gaza has led to 39,653 deaths and 91,535 injuries.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is currently trading at $2,393.37, marking a 0.10% increase. The market remains in a cautious stance, with prices hovering below the key pivot point of $2,416.72.
This level acts as a significant threshold for potential market direction. Immediate resistance is noted at $2,452.64, followed by subsequent resistance at $2,477.89 and $2,498.73, which represents key levels for any bullish momentum.
On the downside, immediate support is established at $2,374.89, with further support at $2,353.65 and $2,335.02.
The Relative Strength Index (RSI) currently stands at 43, indicating that gold is neither in overbought nor oversold territory, but it is closer to the lower end, suggesting limited buying pressure.
The 50-day Exponential Moving Average (EMA) is at $2,411.84, which places the current price below this technical level, reinforcing the bearish sentiment.
The technical indicators suggest a bearish outlook unless prices can break above the pivot point and sustain momentum.
A recommended entry point for a short position is below $2,405, with a target of $2,375 for potential profit, and a stop-loss set at $2,425 to manage risk.
Given the recent price action, traders should be vigilant for any geopolitical or macroeconomic developments that might impact gold prices, including shifts in Federal Reserve policy or changes in global market risk sentiment.
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