GOLD Price Analysis – Sep 25, 2024

Daily Price Outlook

During the European trading session, gold prices (XAU/USD) have struggled to rise and are holding steady around $2,600. However, the market mood has shifted, with more investors willing to take risks due to China’s new economic stimulus, leading them to seek better returns elsewhere, which makes gold less attractive as a safe investment.

Despite this decline, a significant drop in gold prices isn’t expected, as the Federal Reserve's plans to ease monetary policy are putting pressure on the U.S. dollar, making gold more appealing. Moreover, ongoing tensions in the Middle East and uncertainty in U.S. politics ahead of the November elections are also supporting gold prices.

Weak US Economic Data and Rate Cut Expectations Propel Gold Prices to New Highs

On the US front, the broad-based US dollar is facing pressure, with markets currently estimating over a 75% chance that the Federal Reserve will cut interest rates by another 50 basis points in November. This outlook has been reinforced by Tuesday's disappointing US economic data, which pushed the dollar closer to its year-to-date low. As a result, gold prices have surged to a new all-time high.

On the data front, the Conference Board's Consumer Confidence Index fell to 98.7 in September, down from 105.6 in August, indicating a decline in consumer sentiment. Meanwhile, the Present Situation Index dropped from 134.6 to 124.3. Moreover, a survey from the Richmond Fed revealed that manufacturing activity remains weak, with the composite manufacturing index declining to -21 in September from -19.

Traders are closely watching speeches from Fed officials this week, especially from Fed Chair Jerome Powell on Thursday, as these may provide insights into future rate cuts and influence market trends. Moving on, attention will also be on the release of the US Personal Consumption Expenditure (PCE) Price Index on Friday, which is expected to affect demand for the dollar in the short term.

Therefore, the expectation of a Federal Reserve interest rate cut, combined with weak US economic data, has driven gold prices to new highs. As the dollar weakens, gold becomes more attractive, prompting increased demand for the precious metal as a safe haven.

Rising Geopolitical Tensions in the Middle East Increase Demand for Gold as a Safe Haven Asset

On the geopolitical front, the ongoing conflict in the Middle East, particularly between Israel and Palestine, is escalating tensions and impacting global markets. Israel's attacks on Gaza have resulted in significant civilian casualties, with reports of at least 12 Palestinians killed in just the last day.

The situation in Lebanon is also dire, with over 558 fatalities, including many children, due to Israeli airstrikes. The United Nations has urged Israel to refrain from attacking schools that serve as shelters for displaced Palestinians, following tragic incidents that left dozens dead in school attacks.

These developments have raised concerns about further geopolitical instability, which could support gold prices in the market. As tensions rise, investors often turn to gold as a safe haven.

Additionally, the uncertainty surrounding the upcoming U.S. presidential election adds to the complexity of the situation, making it more challenging to predict market movements. As of now, the ongoing conflict has resulted in a staggering number of casualties, with over 41,000 people reported dead and many more injured in Gaza.

The escalating conflict in the Middle East is driving investors towards gold as a safe haven asset. Increased geopolitical instability typically supports higher gold prices, as uncertainties, including the U.S. presidential election, further enhance demand for secure investments.

GOLD (XAU/USD) - Technical Analysis

Gold (XAU/USD) is currently trading at $2,652.43, down 0.18% as profit-taking and market uncertainty weigh on prices. The key pivot point lies at $2,657.23, indicating potential bearish momentum if prices remain below this level.

Immediate resistance sits at $2,670.90, with higher resistance targets at $2,681.48 and $2,691.20. A break above these levels could signal a shift to a bullish bias. On the downside, immediate support is at $2,648.18, followed by $2,640.19 and $2,631.56.

The Relative Strength Index (RSI) is neutral at 55, indicating neither overbought nor oversold conditions. However, a move below the 50 mark could indicate growing bearish sentiment. The 50-day Exponential Moving Average (EMA) is positioned at $2,637.30, offering solid short-term support. If prices break below the $2,648 support level, a drop toward $2,640 or $2,631 is likely.

Given the current setup, traders are advised to adopt a cautious stance. The entry price for selling is recommended below $2,657 with a take-profit target of $2,640 and a stop-loss at $2,674.

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