GOLD Price Analysis – Aug 08, 2024
Daily Price Outlook
Gold prices (XAU/USD) maintained their upward momentum, attracting strong bids around the 2,399 level and reaching an intra-day high of 2,400. The rally was fueled by growing expectations that the Federal Reserve will begin reducing interest rates as early as the September meeting.
This dovish outlook was reinforced by disappointing US economic data, signaling a faster-than-expected slowdown in the world's largest economy. The resulting economic uncertainty has heightened speculation about more substantial rate cuts by the Fed, further enhancing the appeal of non-yielding assets like gold. Additionally, escalating tensions between Iran and Israel have served as another key driver, boosting gold’s status as a safe-haven asset.
US Economic Data and Federal Reserve Expectations Boost Gold Prices
On the US front, the broad-based US dollar remained under pressure, struggling to gain traction as softer economic data signaled a faster-than-expected slowdown in the world's largest economy. This has fueled speculation about larger interest rate cuts by the Federal Reserve, thereby supporting the non-yielding yellow metal, gold.
On the economic data front, government figures released on Tuesday showed that the US trade deficit narrowed by 2.5%, falling to $73.1 billion in June from $75.0 billion in May. This decrease was largely driven by a 1.5% rise in exports, particularly in aircraft and US-produced oil and gas.
As a result, markets are now fully pricing in a 100% likelihood that the Federal Reserve will start lowering borrowing costs at its upcoming policy meeting in September, with nearly a 70% probability of a 50-basis-point rate cut.
Thus, this heightened anticipation of Federal Reserve rate cuts has significantly boosted gold prices, as lower borrowing costs make non-yielding assets like gold more attractive to investors.
Geopolitical Tensions and Economic Concerns Drive Up Gold Prices
On the geopolitical front, rising tensions in the Middle East and worries about China's slowing economy are pushing gold prices higher. Hezbollah has been launching drones into Israel, which has led to retaliatory strikes and ongoing clashes. Hezbollah's leader, Sayyed Hassan Nasrallah, has promised revenge for Israeli attacks, while Iran has demanded action against Israel for allegedly killing a Hamas leader.
This is why, the conflict has extended beyond Gaza, causing significant casualties and worsening the humanitarian crisis. Despite efforts by the U.S. to mediate, fighting continues, increasing geopolitical risks. This uncertainty makes gold more attractive as a safe investment, driving up its price.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is currently trading at $2394.590, reflecting a 0.48% increase. The 4-hour chart highlights a pivotal point at $2405.21.
Immediate resistance levels are set at $2431.41, $2452.64, and $2477.89. These levels could act as barriers if the price attempts to rise.
On the downside, immediate support is found at $2374.89, followed by $2353.65 and $2353.02.
The Relative Strength Index (RSI) is currently at 45, suggesting that gold is in a neutral zone, neither overbought nor oversold.
The 50-day Exponential Moving Average (EMA) stands at $2413.24, indicating that if the price stays below this level, bearish momentum may continue.
A move above the pivot point of $2405.21 could trigger further buying interest, but failure to break this level could result in selling pressure.
In conclusion, the technical indicators and key price levels suggest a cautious approach. The recommended strategy is to enter a sell limit order at $2405, with a take profit at $2375 and a stop loss at $2425.
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