GOLD Price Analysis – Aug 12, 2024
Daily Price Outlook
Gold (XAU/USD) started this week on a bullish track and drew further bids around the 2,442 level, hitting an intra-day high of 2,445.
The upward rally is attributed to increasing geopolitical risks and rising expectations that the Federal Reserve (Fed) will cut interest rates at its next meeting.
Lower interest rates are positive for Gold as they reduce the opportunity cost of holding a non-interest-paying asset.
Meanwhile, the conflict in Gaza is escalating, prompting investors to seek safe-haven assets.
According to Axios news, Israeli Defence Minister Yoav Gallant has reported that Israel anticipates a large-scale military attack by Iran, which could significantly escalate the conflict and threaten global stability.
Looking ahead, traders seem cautious about placing strong positions ahead of US inflation data.
The US Producer Price Index (PPI) will be released on Tuesday, followed by the Consumer Price Index (CPI) on Wednesday.
Additionally, US Retail Sales data on Thursday will influence expectations regarding Federal Reserve policy. Meanwhile, geopolitical developments will also be crucial in determining the near-term direction of the commodity.
Gold Prices Supported by Fed Rate Cut Expectations and Inflation Data
On the US front, traders are betting that the Federal Reserve (Fed) will cut interest rates at its next meeting, which is positive for Gold as lower rates reduce the opportunity cost of holding the non-interest-paying asset.
The Fed's likely move has sparked interest in Gold, with traders anticipating a 49.5% chance of a 0.25% rate cut and a 50.5% chance of a 0.50% cut in September, according to the CME FedWatch Tool.
On the data front, the Consumer Price Index (CPI) for July, due on Wednesday, is expected to show a 0.2% increase for both headline and core inflation, following a 0.1% decline in headline CPI in June.
Meanwhile, the Producer Price Index (PPI), to be released on Tuesday, is forecast to rise by 0.1% in July after a 0.2% gain in June.
If the actual CPI figure is higher than expected, it could lead to doubts about aggressive Fed rate cuts, potentially impacting Gold prices negatively.
Therefore, if the Fed cuts rates, Gold prices could rise as lower interest rates make holding Gold more attractive compared to interest-bearing assets. Higher rate cut expectations generally boost Gold demand.
Geopolitical Tensions Drive Gold Prices Up Amid Gaza Conflict
On the geopolitical front, Gold is rising as investors seek safe-haven assets amid fears that the Gaza conflict will escalate.
According to Israeli Defence Minister Yoav Gallant, Israel expects a large-scale military attack from Iran, which could further destabilize the region.
Recent Israeli attacks have killed at least 25 Palestinians in the past 24 hours, and since October 7, about 1.8% of Gaza’s population has been killed, with most victims under 30.
Hezbollah has also intensified the conflict by launching rockets into northern Israel, targeting several towns.
Hamas is urging the US, Qatar, and Egypt to implement a ceasefire plan proposed by President Joe Biden rather than continue with negotiations. The ongoing conflict has resulted in at least 39,897 deaths and 92,152 injuries in Gaza.
GOLD (XAU/USD) - Technical Analysis
Gold prices are currently hovering around $2,432.25, showing minimal movement with a slight decline of 0.01%.
The 4-hour chart reveals a cautious sentiment among traders as gold remains confined within a narrow trading range.
The immediate resistance is set at $2,431.41, just below the pivot point at $2,451.98. If the price breaks above this immediate resistance, we could see a rally toward the next resistance levels at $2,452.64 and $2,477.89.
Conversely, if the price fails to hold above the pivot point, immediate support is found at $2,380.82, with further downside potential leading to support at $2,354.48 and $2,335.02.
The 50-day Exponential Moving Average (EMA) is positioned at $2,420.84, which serves as a critical support level.
The current RSI reading of 58 suggests a neutral market sentiment with a slight bullish bias, indicating that the market may still have room to move higher before hitting overbought territory.
Given the technical setup, a buy position above the $2,420 level appears prudent, targeting a potential take profit at $2,450.
However, a stop-loss order should be placed just below $2,405 to manage risk in case of a downside reversal.
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