Gold price struggled to capitalize on the previous day’s 2% rise as upbeat US labor market data supported the USD and risk-on sentiment capped gains. The safe-haven precious metal rallied on Thursday, driven by expectations of bigger Fed rate cuts in September and fears of a wider Middle East conflict. However, the USD Index surged to a weekly high on positive labor market news, limiting demand for gold during the Asian session on Friday.
Market Movers: Gold Price Reacts to Fed Rate Cut Speculation and Geopolitical Tensions
- Markets anticipate a 25-basis points rate cut by the Fed in September, with speculation of a 50-bps cut providing support for gold.
- The assassination of Hamas chief Ismail Haniyeh in Tehran has raised concerns of retaliatory strikes by Iran, boosting safe-haven demand for XAU/USD.
- US labor market data showed better-than-expected initial jobless claims, easing recession fears and lifting US Treasury bond yields.
- Investor confidence in the US economy led to a relief rally in equities, limiting gains for gold as a safe-haven asset.
- Chinese inflation figures had minimal impact, with CPI rising in July while PPI continued to decline.
Technical Analysis: Gold Price Poised for Upside Movement Towards Key Resistance Levels
Technical indicators suggest bullish momentum for gold, with a potential move towards the $2,448-2,450 resistance zone. A break above this level could lead to a challenge of the all-time high near $2,483-2,484, followed by the $2,500 mark. On the downside, support is seen at $2,412-2,410, with further cushioning near the 50-day SMA around $2,372-2,371.
Gold FAQs: Understanding the Role of Gold in Investments
- Gold is a safe-haven asset, used as a store of value and hedge against inflation and currency depreciation.
- Central banks hold significant gold reserves to strengthen their currencies and instill trust in their economies.
- Gold has inverse correlations with the US Dollar, US Treasuries, and risk assets, making it a diversification tool in volatile markets.
- Price movements in gold are influenced by geopolitical events, economic data, and the behavior of the US Dollar.