GOLD Price Analysis – Aug 15, 2024
Daily Price Outlook
Gold (XAU/USD) has reclaimed its momentum, drawing bids around the $2,459.10 level and reaching an intra-day high of $2,460.36.
This surge is primarily fueled by expectations of a potential Federal Reserve rate cut in September, which weakens the US dollar and supports gold prices.
Additionally, escalating geopolitical tensions in the Middle East are bolstering gold’s appeal as a safe-haven asset. Iran's decision to ignore Western nations' warnings against retaliating after a Hamas leader was killed in Tehran is making the Middle East more unstable.
This rising tension is leading investors to buy more gold as a safe investment, which increases gold prices.
Impact of Changing Rate Cut Expectations and Fed Caution on Gold Prices
On the US front, the US dollar is weakening as expectations grow for a Federal Reserve rate cut in September.
This weaker dollar is making gold more attractive to investors, pushing up its price. Investors are now looking forward to important economic reports coming later this week, such as US Retail Sales, Initial Jobless Claims, the Philly Fed Manufacturing Index, and Industrial Production.
Recent inflation data from July showed that the Consumer Price Index (CPI) rose by 0.2% from the previous month, with an annual increase of 2.9%.
Core CPI, which excludes food and energy prices, also rose by 0.2% month-over-month and 3.2% year-over-year.
These figures will help investors gauge the future direction of the economy and Federal Reserve policies, influencing gold and other financial markets.
Phillip Streible from Blue Line Futures mentions that market expectations have changed from a 50 basis point rate cut to a smaller 25 basis point cut, which is slowing gold's price increase.
Now, there is a 41% chance of a 50 basis point cut, down from 50% before the recent inflation data was released.
Additionally, Federal Reserve officials, including Atlanta Fed President Raphael Bostic, are being cautious and not committing to a specific rate cut schedule. This uncertainty is affecting gold’s momentum as investors adjust their expectations.
Therefore, the expectation of a smaller 25 basis point rate cut, along with cautious Fed officials, is likely to slow down gold's price increase. While a weaker dollar helps support gold, the reduced likelihood of a bigger rate cut may limit how much gold can rise.
GOLD (XAU/USD) - Technical Analysis
Gold is showing some strength as it edges higher, currently trading at $2,456.89. The price is slightly above the pivot point at $2,452.47, suggesting a bullish bias in the near term.
The 4-hour chart shows that the price has been supported by the 50-day Exponential Moving Average (EMA), which is currently at $2,451.75, reinforcing the bullish sentiment.
Immediate resistance is seen at $2,477.21, followed by more substantial resistance levels at $2,496.82 and $2,515.33.
If gold can break through these levels, it could signal a stronger upward move. On the downside, immediate support lies at $2,433.75, with further support at $2,416.68 and $2,397.96.
These levels are crucial to watch, as a break below the pivot point could shift momentum to the bears.
The Relative Strength Index (RSI) is currently at 52, indicating that the market is neither overbought nor oversold, leaving room for further movement in either direction.
However, with the price holding above the pivot and the 50 EMA, the short-term outlook remains positive.
For those looking to enter a position, buying above $2,452 with a take-profit target at $2,477 could be a strategic move. A stop-loss at $2,440 would help manage risk if the market reverses.
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