GOLD Price Analysis – Aug 28, 2024
Daily Price Outlook
Gold prices (XAU/USD) are currently trading slightly above $2,500, facing a decline as the US Dollar (USD) rebounds. The modest recovery in the Greenback, evidenced by the US Dollar Index (DXY) rising over 0.3% to the 100.90s, is impacting the precious metal.
Investors are now turning their attention to upcoming US economic data, including the Personal Consumption Expenditures (PCE) Price Index on Friday, and the second estimate of the US Gross Domestic Product (GDP) for Q2 on Thursday, for further indications on the Federal Reserve's (Fed) interest rate trajectory.
Additionally, remarks from Atlanta Fed President Raphael Bostic on Wednesday may offer more clues on potential policy moves.
Impact of US Economic Data and Interest Rate Expectations on Gold Prices
On the economic front, the mixed data released this week has provided a nuanced outlook on the US economy.
While the Conference Board's US Consumer Confidence Index rose to 103.3 in August, beating expectations, the Richmond Fed Manufacturing Index for August disappointed, coming in at -19 compared to the forecasted -14.
Meanwhile, US housing data also showed mixed results, with a slight decline in house prices month-over-month but a year-over-year increase exceeding estimates.
Despite these mixed signals, the probability of the Fed enacting a significant 0.50% interest rate cut in September remains stable, as reflected by the CME FedWatch Tool.
The potential for such a rate cut could support gold prices by reducing the opportunity cost of holding non-interest-paying assets like gold.
However, the recent rise in short-term US Treasury yields suggests some market skepticism about the likelihood of a large rate cut, which could limit gold's upside.
Geopolitical Tensions and Investor Positioning Weigh on Gold Prices
In addition to economic factors, gold's price movements are also influenced by investor positions and geopolitical tensions.
According to Daniel Ghali from TD Securities, the current high level of investor interest in gold is worrisome because it’s similar to the extreme levels seen during the pandemic. This could put gold prices at risk of falling.
Meanwhile, the geopolitical tensions, which usually support gold prices, haven’t been strong enough to counterbalance the negative impact of a stronger USD and high investor positions.
As traders wait for more information on the Federal Reserve’s interest rate decisions and upcoming economic data, the short-term outlook for gold remains uncertain.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is currently trading at $2,506.82, down 0.34% for the day. The 4-hour chart reveals a cautious market sentiment, with the price struggling to find solid ground amid a broadly mixed trading session.
The immediate support level is situated at $2,486.73, which aligns closely with the lower boundary of a key support zone. Should gold breach this level, it could further decline toward $2,471.29, followed by the next support at $2,455.47.
On the upside, immediate resistance is observed at $2,526.45, a level that has previously acted as a pivot point in recent sessions.
A break above this could propel gold towards the next resistance levels at $2,544.34 and potentially $2,560.54.
However, with the Relative Strength Index (RSI) hovering around 47, the momentum is slightly bearish, suggesting limited upside potential unless new buying interest emerges.
The 50-day Exponential Moving Average (EMA) at $2,505.82 is currently offering a thin layer of support.
If gold can maintain a position above this moving average, there is potential for a rebound. However, a decisive break below the $2,505 mark could open the door to further downside risks.
Given the mixed technical signals, traders may consider buying above $2,505, targeting the $2,525 level, with a stop loss placed at $2,493. This setup allows for a calculated risk while capitalizing on a potential short-term bounce.
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