GOLD Price Analysis – Aug 26, 2024
Daily Price Outlook
Gold price (XAU/USD) managed to stop its early mild losses and regained some positive traction the $2,524.60 and approaching its all-time highs of $2,526.
However, the surge in gold prices can be attributed to a combination of factors, including rising geopolitical tensions in the Middle East and expectations of a lower interest rate regime from the Federal Reserve (Fed).
The precious metal is benefiting from increased safe-haven demand amid ongoing conflicts and a more dovish Fed outlook.
Fed Chair Powell's Speech and Its Impact on Gold Prices
Gold's recent gains were significantly influenced by Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole symposium.
Powell’s comments on the potential for future interest rate cuts have bolstered gold prices. He highlighted the cooling labor market and indicated that the Fed might reduce rates, suggesting that a lower interest-rate regime is on the horizon.
This shift in policy expectations has increased investor interest in gold, which benefits from lower yields on government bonds. Following Powell’s speech, US government bond yields fell, reducing the opportunity cost of holding non-interest bearing gold.
Market expectations for a substantial rate cut in September have surged, with the likelihood of a 0.50% reduction climbing to the mid-30% range, up from the mid-20% prior to the speech. The US Dollar Index (DXY) also fell to a new year-to-date low of 100.53, further supporting gold’s appeal as a safe haven.
Geopolitical Tensions Fuel Gold's Bullish Momentum
On the other side, the geopolitical developments have also played a crucial role in gold's price movement. Rising tensions in the Middle East, particularly the conflict between Israel and Hezbollah, have heightened demand for safe-haven assets like gold.
Over the weekend, Israel launched a significant pre-emptive strike on Hezbollah positions in Lebanon, prompting a retaliatory missile and drone attack by Hezbollah in northern Israel.
The risk of further escalation involving Iran has also contributed to increased market uncertainty and demand for gold.
This geopolitical risk has provided additional support to gold prices, as investors seek refuge in assets that are perceived as safe during times of heightened geopolitical uncertainty.
The combination of these factors—expected rate cuts by the Fed and escalating geopolitical risks—has fueled gold’s bullish momentum, with prices nearing record levels.
GOLD (XAU/USD) - Technical Analysis
Gold is currently trading at $2,510.35, reflecting a modest dip of 0.12% in today’s session. The precious metal has been struggling to gain upward momentum, and the price action suggests a cautious market.
On the 4-hour chart, Gold is hovering near the key pivot point at $2,515.43. This level is crucial as it has repeatedly acted as a barrier, preventing the price from making a decisive move either up or down.
The RSI is currently at 56, indicating a balanced market sentiment. While this isn’t an overbought level, it’s also not showing strong buying pressure, which aligns with the current price consolidation.
The 50-day EMA at $2,491.19 is providing solid support, and as long as Gold holds above this EMA, the broader trend remains intact. However, the lack of momentum suggests that any upward movement could be capped unless we see a strong push past the immediate resistance.
Speaking of resistance, the first hurdle lies at $2,531.64, followed by $2,545.87 and $2,559.32. A break above these levels could see Gold testing new highs.
On the downside, immediate support is at $2,494.37, with further levels at $2,479.52 and $2,463.26. A break below $2,494.37 could trigger a sell-off, targeting the next support zones.
Conclusion: The market sentiment remains cautious. Gold’s price action suggests a potential for further downside unless it can break above $2,515.43.
Traders might consider selling below $2,515 with a target of $2,490, setting a stop-loss at $2,531 to manage risk.
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