GOLD Price Analysis – Aug 30, 2024

Daily Price Outlook

Gold prices (XAU/USD) have been unable to halt their downward trend, remaining under pressure around the $2,517 level and hitting an intra-day low of $2,512. This decline is attributed to stronger-than-expected US GDP growth, which has supported the US dollar and contributed to gold's losses.

The positive US growth report and Initial Jobless Claims have led to reduced expectations for a deeper rate cut by the US Federal Reserve in September. This was seen as a key factor that boosted the US dollar and weighed on non-yielding gold.

However, escalating geopolitical tensions in the Middle East and the ongoing war between Russia and Ukraine could increase safe-haven demand, potentially limiting further losses for the yellow metal.

Investors will closely monitor US inflation data for clues on the potential size of a Federal Reserve rate cut. The core Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred inflation gauge, is expected to rise by 2.7% year-over-year in July, up from 2.6% in June.

A softer-than-expected PCE reading could prompt the Fed to initiate a rate-cutting cycle, which would likely provide support for XAU/USD.

US Dollar Strength and Reduced Rate Cut Expectations Pressure Gold Prices

On the US front, the dollar is gaining strength due to a strong US growth report and better-than-expected Initial Jobless Claims. The US Gross Domestic Product (GDP) grew by 3.0% annualized in the second quarter (Q2), surpassing the initial estimate of 2.8%.

Additionally, Initial Jobless Claims for the week ending August 24 fell to 231K from 233K, coming in below the expected 232K. This economic strength has led to reduced expectations for a significant rate cut by the Federal Reserve in September, which puts pressure on non-yielding assets like gold.

On the other side, Atlanta Fed President Raphael Bostic indicated that it might be "time to move" on rate cuts if inflation continues to ease and the unemployment rate rises more than expected. However, he wants more evidence from upcoming jobs and inflation reports before making a decision.

Currently, markets are pricing in a 66% chance of a 25 basis points (bps) rate cut in September, with the likelihood of a larger cut at 34%, down from 36.5% before the GDP data, according to the CME FedWatch Tool.

Therefore, the strengthening US dollar and reduced rate cut expectations pressure gold prices, as higher economic growth and job data diminish the appeal of non-yielding assets. Gold may face continued losses if the Fed's stance on rate cuts remains cautious.

GOLD (XAU/USD) - Technical Analysis

Gold (XAU/USD) is currently trading at $2,519.84, down 0.07% on the day, as it hovers near the key support level of $2,512.36.

The metal remains caught in a narrow range, reflecting a lack of strong directional momentum. The Relative Strength Index (RSI) is neutral at 52, indicating that neither bulls nor bears have a clear upper hand in the short term.

Technically, Gold is positioned just above the 50-day Exponential Moving Average (EMA) at $2,515.16, providing near-term support. A critical pivot point lies at $2,529.23, which traders should closely monitor.

If the price breaks above this level, it could open the door to further gains, with immediate resistance at $2,544.34 and subsequent targets at $2,560.54.

The market’s indecision is highlighted by the tight trading range, with Gold consolidating between $2,512.36 and $2,529.23. This consolidation phase could precede a significant move.

Given the broader market context, a break above $2,529.23 could be an entry point for bullish positions, targeting $2,530 with a stop-loss just below $2,512 to manage risk effectively.

Conversely, a break below the $2,512.36 support could signal a bearish turn, potentially driving prices towards $2,500 and lower.

In summary, Gold's near-term outlook hinges on key levels.

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