GOLD Price Analysis – Aug 20, 2024
Daily Price Outlook
Gold prices (XAU/USD) halted their downward trend and gained bullish momentum, climbing to the 2,522.20 level and reaching an intra-day high of 2,525.23.
The rally was fueled by expectations of Federal Reserve rate cuts, which pushed the US Dollar (USD) to a multi-month low, benefiting XAU/USD.
Geopolitical risks also provided additional support as traders await further cues on the Fed's rate-cut trajectory.
The USD has experienced a sustained selling bias for the third consecutive day, driven by the growing belief that the Fed will initiate its rate-cutting cycle in September, a key factor attracting investors to the non-yielding yellow metal.
Weakening US Dollar and Fed Rate Cut Expectations Drive Gold Prices Higher
On the US front, the US Dollar continues to weaken as expectations grow that the Federal Reserve will start cutting interest rates in September.
This belief has fueled demand for gold, which benefits from lower interest rates. The CME Group’s FedWatch Tool indicates a higher likelihood of rate cuts beginning in September, with potential reductions totaling over 200 basis points by the end of 2025.
Fed officials, including Neel Kashkari and Austan Goolsbee, have suggested that discussions about rate cuts are warranted, as the US economy shows no signs of overheating.
However, recent positive Retail Sales data have alleviated recession fears, leading to some uncertainty about the pace of rate cuts.
Investors are now closely watching the July FOMC meeting minutes and Fed Chair Jerome Powell’s upcoming comments for clues on the Fed’s next move.
This news is likely to boost gold prices as the weakening US Dollar and anticipated Federal Reserve rate cuts increase demand for the non-yielding metal, which benefits from lower interest rates and serves as a safe haven during economic uncertainty.
Middle East Ceasefire Hopes Rise as Israel-Hamas Negotiations Resume Amid Escalating Tensions
On the geopolitical front, US Secretary of State Antony Blinken announced that Israeli Prime Minister Benjamin Netanyahu has accepted a proposal aimed at resolving disagreements hindering a hostage release deal with Hamas, raising hopes for a ceasefire that could ease Middle East tensions.
Negotiations are set to resume this week, increasing optimism for a ceasefire, which in turn has boosted investor interest in riskier assets.
Meanwhile, the Israeli army reported recovering the bodies of six hostages from Hamas, while Hezbollah launched rocket attacks on Israeli military targets following Israeli strikes deep into Lebanon’s Bekaa Valley.
Amid ongoing violence, Hamas accused the US of enabling Israel's actions, and protests erupted in Chicago against the Biden administration’s support for Israel.
The conflict has claimed over 40,000 lives in Gaza, with more than 200 people taken captive during Hamas's attacks on October 7.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is currently trading at $2512.66, showing a minor decline of 0.09%. The key level to watch is the pivot point at $2523.98.
This level will likely determine the short-term direction of the market. Immediate resistance is found at $2524.11, with further resistance levels at $2540.75 and $2556.71.
On the downside, support is seen at $2491.41, with additional support at $2480.08 and $2461.80.
The Relative Strength Index (RSI) is currently at 66, indicating that gold is nearing overbought territory, which could signal a potential correction.
The 50-day Exponential Moving Average (EMA) is positioned at $2459.26, providing strong support for the current uptrend.
Given the technical setup, if gold breaks above the pivot point of $2523.98, it could lead to further bullish momentum. However, if the price falls below $2491.41, we could see a deeper correction.
Conclusion: Consider buying above $2508, targeting $2523, with a stop loss at $2490. A break below $2491.41 could trigger further downside.
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