GOLD Price Analysis – Sep 10, 2024
Daily Price Outlook
Gold (XAU/USD) is struggling to maintain its upward momentum, dipping slightly below $2,500 as a stronger US dollar weighs on the market.
The dollar's boost comes as expectations for a 50 basis point rate cut from the Federal Reserve begin to fade.
However, gold remains resilient above the $2,500 level in early European trading, with investors adopting a wait-and-see approach ahead of key US inflation data later this week.
Moving ahead, the upcoming Consumer Price Index (CPI) report on Wednesday and the Producer Price Index (PPI) on Thursday are expected to be pivotal in shaping the Fed’s rate policy outlook, which could provide clearer direction for gold prices, especially given its appeal as a non-interest-bearing asset.
Gold Pressured by Stronger US Dollar and Reduced Fed Rate Cut Expectations
On the US front, the broad-based US dollar is climbing back toward its monthly high, as reduced expectations for a larger rate cut by the Federal Reserve in September support its strength.
The stable performance in global equity markets is also putting pressure on gold prices, which typically serve as a safe-haven asset.
Last Friday's mixed US employment data lowered the chances of a 50-basis point rate cut, boosting the US dollar and acting as a headwind for gold.
Currently, traders see a 71% chance of a 25-basis-point cut and only a 29% chance of a larger 50-basis-point cut at the next Fed meeting on September 17-18, according to CME Group's FedWatch tool.
Investors are now awaiting key US inflation reports this week, with the August Consumer Price Index (CPI) set for release on Wednesday and the Producer Price Index (PPI) on Thursday. These figures are expected to influence the Fed’s upcoming rate cut decision.
Meanwhile, New York Fed President John Williams noted that inflation remains stable, suggesting the Fed could move toward a more neutral stance.
Fed Governor Christopher Waller also supported reducing rates to maintain economic growth, while Chicago Fed President Austan Goolsbee said policymakers are aligning with market expectations for a policy shift.
This news is putting downward pressure on gold, as a stronger US dollar and reduced expectations for a larger Fed rate cut decrease demand for the non-yielding asset. Investors are cautious, awaiting key inflation data that could further influence gold prices.
Escalating Gaza Conflict May Boost Gold Demand as Safe-Haven Asset
On the geopolitical front, Israel launched an airstrike on a tented camp near Khan Younis in southern Gaza, killing at least 40 people and injuring 60 others.
Israel claims it targeted a Hamas command center, but Hamas has called this a "clear lie." The strike is part of Israel's ongoing military actions in Gaza, which have resulted in over 40,988 deaths and 94,825 injuries in the territory.
Meanwhile, the UN's polio vaccination campaign in northern Gaza faces uncertainty after Israeli soldiers detained UN staff at gunpoint, and bulldozers damaged UN vehicles, according to UNRWA chief Philippe Lazzarini.
The vaccination campaign was set to start on Tuesday, but its status is now unclear. In Israel, at least 1,139 people were killed in the October 7 Hamas-led attacks, and more than 200 were taken hostage.
Therefore, the escalating violence in Gaza may drive investors toward safe-haven assets like gold due to heightened geopolitical uncertainty.
As conflict intensifies, gold could see increased demand as a secure investment option amid global instability and risk aversion.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is currently trading at $2,503.72, down 0.18% in the 4-hour timeframe, as it consolidates near a critical support level.
The pivot point sits at $2,500.09, which acts as a key psychological threshold. The market appears indecisive with the Relative Strength Index (RSI) holding steady at 51, indicating neutral momentum.
On the upside, immediate resistance lies at $2,511.75, followed by the next resistance levels at $2,529.29 and $2,540.41.
Breaking above these levels could signal a bullish continuation, with $2,540.41 serving as a significant hurdle to clear.
Conversely, immediate support is found at $2,491.58, followed by stronger support at $2,478.37 and $2,466.90. A break below $2,491 could trigger further selling pressure, driving the metal towards lower support levels.
The 50-day Exponential Moving Average (EMA) at $2,502.7480 is closely aligned with the current price, suggesting that gold is testing its near-term trend.
The market outlook remains cautiously bullish above the $2,500 pivot point. A break below this key support could shift momentum to the downside, while holding above it keeps the bullish trend intact.
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