Gold prices continued to climb for the second consecutive day, driven by expectations of Federal Reserve (Fed) policy easing in September and escalating tensions in the Middle East involving Israel, Lebanon, and Iran. The XAU/USD pair is currently trading at $2,432, marking a 0.22% increase.
The latest US economic data indicates a slowdown in the economy, but not to the extent of sparking recession concerns. Despite weak figures such as the ISM Manufacturing PMI and July Nonfarm Payrolls (NFP), US equities saw gains towards the end of the New York session.
Furthermore, lower-than-expected Initial Jobless Claims for the week ending August 3 suggest that the job market remains robust, albeit with a slight cooling trend.
Gold prices are being supported by a decrease in US Treasury bond yields and the weakening US Dollar. The 10-year US benchmark note rate has dropped by nearly five basis points to 3.944%, while the US Dollar Index (DXY) is down 0.10% at 103.13.
Analysts at ING predict that Gold will continue to perform well in the near future, citing ongoing geopolitical uncertainties and expectations of interest rate cuts by the Fed as key factors.
Geopolitical tensions in the Middle East are also contributing to the bullish sentiment surrounding Gold, with reports indicating potential escalations in conflicts involving Israel, Iran, and Hezbollah.
Looking ahead, market participants are keeping an eye on next week’s data releases, particularly inflation data, retail sales figures, building permits, and consumer sentiment indicators from the US.
Key Market Updates: Gold Maintains Momentum Despite China’s Absence
- July’s Producer Price Index is expected to decrease from 0.2% to 0.1% month-on-month.
- Forecasts suggest a slight dip in the Consumer Price Index (CPI) from 3% to 2.9% year-on-year, with core CPI also expected to trend lower from 3.3% to 3.2% year-on-year.
- US Retail Sales are anticipated to rise from 0% to 0.3% month-on-month.
- Despite reports of China’s central bank refraining from Gold purchases for the third consecutive month, the price of Gold continues to climb.
- The CME FedWatch Tool shows a 52.5% probability of a 50-basis-point interest rate cut by the Fed at the upcoming September meeting.
Technical Analysis: Gold Price Consolidates Around $2,430
Gold’s uptrend remains intact, with resistance around the $2,430 level. Buyers are struggling to break through this level before targeting the psychological barrier at $2,450. The Relative Strength Index (RSI) suggests that buyers are gaining momentum, indicating a potential for higher prices.
If the price surpasses $2,450, the next resistance levels are at $2,477 and the all-time high at $2,483. Further upside could target the $2,500 level. On the downside, a drop below the 50-day Simple Moving Average at $2,370 could lead to further declines towards the 100-day SMA at $2,349 and a support trendline at $2,320, with $2,300 as the next key support level.
Gold FAQs
What is Gold’s role in the economy?
Gold has historically served as a store of value and medium of exchange. It is considered a safe-haven asset during turbulent times, acting as a hedge against inflation and currency depreciation.
Who are the biggest holders of Gold?
Central banks hold the largest reserves of Gold, using it to support their currencies and strengthen their economies during times of uncertainty. Emerging economies like China, India, and Turkey are increasing their Gold reserves.
What factors influence Gold prices?
Gold prices are influenced by various factors, including geopolitical instability, economic conditions, and currency movements. It has an inverse correlation with the US Dollar and is often seen as a safe-haven asset in times of crisis.
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