GOLD Price Analysis – Aug 29, 2024
Daily Price Outlook
Gold (XAU/USD) extended its upward rally and remained well bid around the 2,523 level, hitting an intraday high of 2,524.49.
The strong bullish rally can be attributed to the revival of Chinese demand for the precious metal.
Gold likely gained support after data from the World Gold Council (WGC) on Tuesday showed that China’s net gold imports rose by 17% in July, marking the first monthly increase since March.
Additionally, fresh selling pressure on the US dollar was seen as another key factor that boosted gold prices.
The US Dollar Index (DXY) pulled back on Thursday, trading in the 100.90s, down from a peak of 101.18 reached on Wednesday.
Traders are now looking ahead to US Jobless Claims and Gross Domestic Product (GDP) data, set to be released on Thursday, for more clarity on the projected path of US interest rates.
Gold Gains on Increased Chinese Demand and North American Fund Inflows
On the China front, Gold's upward trend was boosted by increased demand from China. In July, China's net gold imports rose by 17%, marking the first monthly increase since March 2024, according to data from the World Gold Council (WGC).
This surge in demand is likely contributing to gold's recent strength. Additionally, a modest increase in net inflows of 8 metric tons ($403 million) from North American funds last week also supported gold prices. These factors, combined with the overall demand for gold, are helping to sustain its upward momentum.
Gold Gains Amid Weaker US Dollar and Anticipation of Key Economic Data
On the US front, the precious metal is benefiting from a weakening US Dollar (USD), as the US Dollar Index (DXY) is pulling back to the 100.90s on Thursday. Gold, which is negatively correlated with the USD, tends to rise when the dollar falls.
Traders are now awaiting US Jobless Claims and Gross Domestic Product (GDP) data for more insight into the future of US interest rates.
However, the jobs data is especially important after Federal Reserve Chairman Jerome Powell highlighted potential risks to the labor market from keeping interest rates high.
The GDP data is expected to remain steady at 2.8% for Q2, but any negative surprises could push Gold higher by suggesting that the Fed might need to lower interest rates sooner than expected.
Looking ahead, Friday could be a significant day for Gold as the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Price Index, will be released.
If the core PCE inflation rises to 2.7% as expected, it could suggest that the Fed will keep interest rates elevated, which may weaken Gold.
However, if inflation comes in lower than expected, Gold could see a boost. A risk to Gold's price is the extreme long positioning in the market, which could lead to a sharper decline if sentiment shifts, as noted by Daniel Ghali, Senior Commodity Strategist at TD Securities.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is currently trading at $2,517.26, marking a 0.52% increase on the day. The precious metal is showing resilience as it hovers just above the 50-day Exponential Moving Average (EMA) of $2,512.41.
This EMA level is crucial, acting as immediate support that has kept the bullish sentiment alive. The Relative Strength Index (RSI) sits at 56, suggesting moderate buying momentum, but not yet in overbought territory.
The pivot point is set at $2,530.00, serving as the primary threshold for any substantial upward movement. Immediate resistance is seen at $2,526.45, a key level that needs to be breached for the rally to gain further traction.
Should gold break this resistance, the next targets are $2,544.34 and $2,560.54, where the bulls could potentially extend their gains.
On the downside, the immediate support lies at $2,486.73. A breach below this level could shift the market sentiment to bearish, with further support levels at $2,471.29 and $2,455.47. These levels are crucial for traders to watch, as a dip below $2,455.47 could signal a deeper correction.
For traders considering a position, an entry above $2,512.00 appears favorable, with a take-profit target set at $2,530.00.
A stop-loss at $2,500.00 is advisable to mitigate downside risks. Overall, while the bullish momentum seems intact, the market remains in a sensitive zone, where breaking through either resistance or support could set the next directional trend.
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