Gold Price Rebounds from One-Week Low Amid Fed Rate Cut Expectations and Geopolitical Risks
The price of gold (XAU/USD) saw a slight increase after touching a one-week low on Monday, finding support around the 50-day Simple Moving Average (SMA) at $2,365-2,364. Concerns over a potential economic downturn in the US, fueled by softer macro data, have increased expectations for larger interest rate cuts by the Federal Reserve (Fed). This has led to a decline in US Treasury bond yields and added support to gold as a safe-haven asset amidst escalating geopolitical tensions in the Middle East.
While a shift in global risk sentiment may limit gains in gold as US bond yields rebound, the overall market outlook favors bullish traders. The path of least resistance for XAU/USD appears to be upward, with potential buying interest below the $2,400 level. However, the absence of significant US economic data releases could keep any downside moves in check.
Key Market Influences: Fed Rate Cut Speculation and Middle East Crisis Drive Gold Price Movements
- Last week’s US macro data revealed a sharper contraction in manufacturing activity and slower job growth, fueling concerns of a possible recession and expectations for aggressive Fed policy easing.
- US Treasury bond yields plummeted to multi-year lows, with traders pricing in a high probability of a 50-basis points rate cut in September.
- Despite upbeat US Services PMI data, geopolitical tensions in the Middle East, including threats of retaliation against Israel, continue to support gold as a safe-haven asset.
- While risk-on sentiment and a stronger US Dollar may temporarily weigh on gold prices, the overall market dynamics favor a positive outlook for the precious metal.
Technical Analysis: Gold Price Outlook and Key Levels to Watch
Technical analysis suggests that the 50-day SMA support near $2,365-2,364 is crucial for short-term price movements. A break below this level could signal further downside towards the $2,342 zone or the 100-day SMA. On the upside, resistance levels at $2,430 and $2,448-2,450 could challenge bullish momentum, with potential for a rally towards the all-time peak near $2,483-2,484.
Understanding Gold: FAQs for Investors
- Gold is considered a safe-haven asset and a hedge against inflation, often favored by central banks for its stability and value.
- Central banks worldwide are increasing their gold reserves to support their currencies and improve economic strength.
- Gold prices are influenced by factors such as geopolitical instability, interest rates, and the strength of the US Dollar.
- Investors can diversify their portfolios with gold to mitigate risks and benefit from its inverse correlation with other assets.