GOLD Price Analysis – Aug 23, 2024
Daily Price Outlook
Gold prices (XAU/USD) extended their upward rally, gaining traction around the $2,498.40 level and reaching an intra-day high of $2,501.85. This rebound is primarily fueled by a bearish US dollar, which lost its traction on the back of dovish expectations from the Federal Reserve. The overall outlook for gold remains positive ahead of a key event: Federal Reserve Chairman Jerome Powell's speech at the central banker symposium in Jackson Hole. Powell is anticipated to affirm market expectations of a rate cut at the Fed’s September 18 meeting. Additionally, persistent geopolitical tensions continue to lend support to gold prices.
Impact of Weakening US Dollar and Fed Rate Cut Expectations on Gold Prices
On the US front, the broad-based US Dollar (USD) is losing momentum as expectations grow that the Federal Reserve (Fed) may begin lowering interest rates at its September policy meeting. Although the USD had briefly rebounded from its year-to-date low, thanks to a rise in US Treasury bond yields, this recovery has been weak. Investors are increasingly betting on an imminent start to the Fed's rate-cutting cycle, which has helped limit losses for gold (XAU/USD).
On the data side, the US Department of Labor reported that Initial Jobless Claims rose to 232,000 in the week ending August 17, slightly above the previous 228,000. A review also showed that US employers added 818,000 fewer jobs than initially reported for the year through March.
Additionally, minutes from the July Federal Open Market Committee (FOMC) meeting revealed growing support among policymakers for a rate cut next month as inflation shows signs of easing. Meanwhile, the S&P Global flash PMI pointed to a sharp contraction in the manufacturing sector, while the services sector saw unexpected growth. Some Fed officials remain cautious, expressing the need for more data before fully endorsing a rate cut.
Therefore, these developments positively impact gold prices by weakening the US dollar and increasing expectations of Federal Reserve rate cuts. Economic uncertainties highlighted by recent data boost gold's appeal as a safe-haven asset, supporting and potentially elevating its value.
GOLD (XAU/USD) - Technical Analysis
Gold is currently demonstrating strength, trading at $2,492.85, up 0.33% for the day. The key pivot point at $2,503.37 will be crucial in determining gold's next move. Immediate resistance lies at $2,520.98, with further resistance levels at $2,540.75.
On the downside, support is found at $2,475.81, with additional levels at $2,450.95 and $2,432.88. The Relative Strength Index (RSI) is at 48, indicating neutral momentum, while the 50-day Exponential Moving Average (EMA) at $2,485.74 provides underlying support.
If gold manages to break above the $2,503.37 pivot point, it could sustain its upward trend, potentially reaching the $2,520.98 resistance level. However, if the price falls below the $2,475.81 support level, it could signal a deeper correction.
Conclusion: Consider buying above $2,480, with a target of $2,505 and a stop loss at $2,462. This strategy offers a balanced risk-to-reward ratio, especially if gold maintains its upward momentum.
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