GOLD Price Analysis – Aug 27, 2024
Daily Price Outlook
Gold prices (XAU/USD) extended their downward trend, hovering near $2,507.77 after touching an intra-day low of $2,503.64.
This decline is partly due to renewed strength in the US Dollar (USD) on Tuesday. However, the US Dollar gained traction despite remarks from Federal Reserve Chair Jerome Powell at the Jackson Hole symposium hinting at potential interest rate cuts.
This dovish stance could cap gains in the US Dollar and provide support for the precious metal, as lower interest rates typically boost gold by decreasing the opportunity cost of holding non-yielding assets, potentially reversing its recent losses.
Meanwhile, the increasing escalating geopolitical tensions in the Middle East could further bolster gold, a traditional safe-haven asset.
On the flip side, the People's Bank of China (PBOC) halted gold purchases in July for the third consecutive month, potentially contributing to the dip in gold prices by diminishing overall market support.
Impact of US Economic Data and Fed Signals on Gold Prices
However, the broad-based US Dollar saw modest gains and remained bullish on Tuesday. Although, the comments from key Federal Reserve (Fed) officials suggest that interest rate cuts may be forthcoming, which could support gold prices.
Fed Chair Jerome Powell, speaking at Jackson Hole, hinted at potential policy adjustments and expressed confidence that inflation is nearing the Fed's 2% target.
San Francisco Fed President Mary Daly suggested that initiating rate cuts might be appropriate, while Richmond Fed President Thomas Barkin advocated for a "test and learn" approach. These mixed signals from the Fed could influence market dynamics and affect gold prices.
On the data front, the US economy demonstrated strength as Durable Goods Orders surged 9.9% in July, marking the highest increase since May 2020 and significantly surpassing the expected 4% rise.
Despite this robust economic data, the markets, as indicated by the CME FedWatch Tool, have fully priced in a 25 basis points rate cut, with a 30% probability of a larger cut, down from 36.5% the previous week.
Therefore, the US Dollar's modest gains and mixed Fed signals, along with strong Durable Goods Orders, may pressure gold prices. While potential rate cuts could support gold, robust economic data and a stronger Dollar could limit upward movement.
Geopolitical Tensions and Their Impact on Gold Prices
On the geopolitical front, US Air Force General C.Q. Brown reported that concerns about a larger conflict in the Middle East have lessened following a brief exchange of fire between Israel and Hezbollah.
However, he cautioned that Iran remains a significant threat, potentially considering a strike on Israel. In Egypt, ceasefire talks continue, but Hamas has rejected new Israeli conditions, sticking to a proposal from US President Joe Biden and the UN Security Council.
The easing of immediate conflict fears could stabilize gold prices, but ongoing tensions with Iran and Hamas might keep gold in demand as a safe-haven asset. Recent violence includes Israeli attacks on Gaza, particularly in Deir el-Balah and Khan Younis, resulting in at least 20 deaths.
Additionally, Israel is blocking fuel to Gaza's medical sector and has forced the UN to halt aid operations.
In the occupied West Bank, six Palestinians have been killed by Israeli soldiers and settlers, and far-right Israeli minister Itamar Ben-Gvir has made controversial statements about the Al-Aqsa Mosque compound.
Therefore, the reduction in immediate Middle East conflict fears could stabilize gold prices, but ongoing tensions, especially with Iran and Hamas, may sustain gold's appeal as a safe-haven asset. Continued violence and uncertainties in the region typically support higher gold prices.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is currently trading at $2,509.22, down 0.37% for the day, reflecting a bearish bias in the short term.
The key pivot point to watch is $2,515.43. If gold prices manage to hold above this level, we could see a potential rebound with immediate resistance at $2,531.64, followed by $2,545.87 and $2,559.32.
However, if the price fails to break above the pivot point, immediate support is seen at $2,494.37, with deeper levels at $2,479.52 and $2,463.26 offering additional safety nets for buyers.
The 50-day EMA, currently at $2,506.67, is acting as a short-term support level. If gold maintains its position above this moving average, it could provide a base for a bullish reversal.
The Relative Strength Index (RSI) is hovering at 47, suggesting that the market is neither overbought nor oversold, but leaning toward bearish territory.
This neutral-to-bearish momentum indicates that the market could swing either way depending on upcoming market catalysts.
The overall technical picture suggests caution. A clear break above $2,515.43 would trigger buying interest, with a potential move towards $2,526 as the first target.
Conversely, if gold dips below $2,494, it could open the door for further downside, possibly toward the $2,479 level.
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