GOLD Price Analysis – Sep 27, 2024
Daily Price Outlook
Gold prices (XAU/USD) came under selling pressure on the final trading day of the week, pulling back from the record high of $2,686 set on Thursday. The drop was primarily driven by renewed demand for the US Dollar (USD), which typically weakens gold's appeal.
In the meantime, the positive market sentiment, fueled by China's new stimulus measures, also turned investor interest away from the safe-haven asset.
Nevertheless, expectations of more aggressive Federal Reserve rate cuts are keeping the US dollar close to last week’s year-to-date low. Furthermore, the escalating geopolitical tensions in the Middle East limit gold's downside.
Traders are now focused on the upcoming US Personal Consumption Expenditure (PCE) Price Index for further market direction.
Impact of US Economic Data and Fed Commentary on Gold Prices
On the US front, the broad-based US Dollar saw a slight uptick due to increased buying, which typically reduces demand for gold. Federal Reserve Governor Michelle Bowman defended her decision to vote against a substantial rate cut in September, citing ongoing inflation risks.
Atlanta Fed President Raphael Bostic also urged caution against rushing into rate cuts, while other officials suggested that larger cuts could be on the horizon.
Meanwhile, Fed Governor Lisa Cook supported the recent 50-basis-point cut, acknowledging a decrease in inflation risks but raising concerns over rising employment challenges.
Market participants now see a more than 50% chance of the Federal Reserve cutting interest rates by 50 basis points at its November meeting.
Recent data from the Bureau of Economic Analysis revealed that the US economy grew at an annual rate of 3% in the second quarter, in line with initial estimates.
Meanwhile, the Census Bureau reported flat new orders for manufactured durable goods in August, though orders excluding transportation rose by 0.5%.
Moreover, initial jobless claims dropped to 218,000, the lowest since mid-May. While this data temporarily supported the USD, the Fed's overall dovish outlook has kept gold prices steady, with the upcoming release of the Personal Consumption Expenditure (PCE) Price Index potentially providing further support for gold.
Therefore, the mixed signals from US economic data and Fed commentary have created uncertainty, supporting gold prices.
Dovish Fed expectations could limit USD strength, making gold an attractive safe-haven asset, especially ahead of the upcoming Personal Consumption Expenditure Price Index release.
Geopolitical Tensions and Market Optimism Drive Gold Prices to New Highs
On the geopolitical front, escalating tensions in the Middle East and the potential for a wider regional conflict are driving gold prices to new all-time highs.
As a safe-haven asset, gold typically appreciates during periods of uncertainty as investors seek protection. However, a positive market sentiment, fueled by new stimulus measures from China, is diverting funds away from gold and into riskier assets.
This shift is diminishing demand for gold, as investors increasingly seek higher returns in other areas of the market.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is trading at $2,670.84, down 0.16% during today’s session, as it struggles to maintain its recent bullish momentum.
The precious metal is hovering around key technical levels, with immediate support found at $2,659.88. A drop below this could see further downside toward $2,653.43, while strong resistance at $2,677.76 will be the first hurdle for bulls to overcome.
The 50-day Exponential Moving Average (EMA) is currently at $2,664.45, providing short-term support. If Gold prices remain above this level, the bullish trend could resume, targeting the next resistance at $2,685.83.
A decisive break above this could open the door to test the psychological $2,700 mark. However, failure to hold the EMA could lead to further declines, with the next support seen at $2,646.49.
The Relative Strength Index (RSI) sits at 53, indicating neutral conditions. With room for further upward movement, the RSI suggests that Gold could still have some upside potential, especially if upcoming U.S. economic data triggers safe-haven demand.
However, a cautious approach is recommended as any break below $2,660 could trigger a sharper selling trend.
In conclusion, Gold’s near-term outlook hinges on its ability to stay above the 50 EMA and immediate support levels.
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