GOLD Price Analysis – Sep 05, 2024
Daily Price Outlook
Gold (XAU/USD) extended its bullish rally, reaching an intraday high of $2,506. This upward trend can be attributed to weaker-than-expected U.S. job data, which boosted safe-haven demand for gold.
The prospect of falling interest rates in the U.S. also supports gold prices, as lower rates reduce the opportunity cost of holding a non-interest-bearing asset. Despite this positive backdrop, traders are exercising caution, avoiding aggressive bullish bets ahead of the critical U.S. Nonfarm Payrolls (NFP) report scheduled for Friday.
Apart from this, investors will keep their eyes on Thursday’s U.S. economic releases, including the ADP private sector employment report, Weekly Jobless Claims, and the ISM Services PMI. These reports are anticipated to offer short-term trading opportunities and further insights into market direction.
Weaker US Job Data and Fed Rate Cut Speculations Drive Gold Prices Up
On the US front, the broad-based US dollar struggled as recent economic reports suggested the Federal Reserve (Fed) might opt for more aggressive interest rate cuts in September.
On the data front, the latest labor market report showed job openings fell to 7.673 million in July, the lowest since January 2021, and June’s figures were revised lower. This decline, coupled with the Fed’s Beige Book indicating reduced economic activity in most regions, has raised speculation about a shift in Fed policy.
Gold prices saw a recovery due to the weaker US job data, as this increased demand for the safe-haven asset. Meanwhile, the lower interest rates would reduce the opportunity cost of holding gold.
However, the chance of the Fed cutting rates by 0.50% in September has jumped to 45% from around 31% before the data. With upcoming ADP Employment Change and Jobless Claims reports, and the critical US Nonfarm Payrolls (NFP) due on Friday, any further weak employment figures could strengthen the case for a larger rate cut.
Escalation in Israeli-Palestinian Conflict Boosts Demand for Gold
On the geopolitical front, tensions remain high as Israeli forces shot and killed a 16-year-old Palestinian boy in the Far’a refugee camp. According to Wafa news agency, soldiers fired multiple bullets at the child, abused him, and prevented ambulance crews from reaching him.
In response, Hamas has accused Israeli Prime Minister Benjamin Netanyahu of obstructing a ceasefire deal by refusing to withdraw forces from Gaza’s Philadelphi Corridor.
Consequently, the situation in Gaza continues to escalate, with recent Israeli bombardments killing at least 18 Palestinians. Palestinian officials report that around 4,000 residents have been forced to flee their homes in east Jenin under gunpoint, and the UN has criticized Israel for using "war-like tactics" against civilians in the West Bank.
Hence, the conflict has resulted in a severe humanitarian crisis, with over 40,000 people killed and nearly 95,000 wounded in Gaza. In contrast, at least 1,139 people were killed in Israel due to Hamas-led attacks on October 7.
Therefore, the escalation in the Israeli-Palestinian conflict, with increased casualties and ongoing violence, heightens geopolitical uncertainty. This typically boosts demand for safe-haven assets like gold, leading to potential price increases as investors seek stability.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is showing signs of strength as it attempts to break through key resistance levels. The price is now trading above the pivotal $2,500 mark, which acts as both psychological and technical resistance. This level coincides with the 50-day Exponential Moving Average (EMA) at $2,506.32, signaling that bullish momentum is building. Should the price continue to hold above this level, we could see a test of the next resistance at $2,520, followed by $2,527.
The Relative Strength Index (RSI) at 54.62 suggests that momentum is in the buyers' favor but not yet overbought, leaving room for more upward movement. On the support side, $2,490 remains critical, and a drop below this level could shift the momentum back to the bears, driving the price toward the next support at $2,482.
From a technical perspective, the gold market has broken out of a descending channel, suggesting further upward potential. However, if the price fails to sustain above $2,500, it could lead to renewed selling pressure.
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