Gold Price Update: Positive Risk Tone Caps Gains, Geopolitical Risks Provide Support
Gold price struggles to find direction amidst conflicting forces on Monday. Despite a positive risk tone in equity markets, geopolitical tensions and Fed rate cut expectations offer support to the precious metal. Traders are also hesitant ahead of the release of key US inflation figures later this week.
Currently, Gold price (XAU/USD) is trading in a narrow range during the Asian session. The overall optimistic sentiment in equities is hindering the safe-haven appeal of Gold. However, geopolitical uncertainties in the Middle East and dovish Fed outlook keep the US Dollar weak, supporting Gold.
Market participants are waiting for the US inflation data, starting with the Producer Price Index (PPI) on Tuesday, followed by the Consumer Price Index (CPI) on Wednesday. Retail Sales figures on Thursday will also impact Fed policy expectations and USD demand, influencing Gold price movements.
Key Market Developments Driving Gold Price
- Israel intercepts projectiles from Lebanon, raising tensions in the region.
- Heightened alert in Israel following observations in Western Iran.
- Hamas seeks cease-fire based on previous negotiations.
- US deploys additional guided missile submarine to the Middle East.
- Geopolitical risks combined with dovish Fed expectations support Gold price.
- Market fully expects a 25-basis points Fed rate cut in September.
- USD struggles to gain traction, benefiting Gold price.
- Traders cautious ahead of US inflation data release.
- Inflation figures and Retail Sales data will shape Fed policy decisions.
Technical Analysis: Gold Price Outlook
Technical indicators suggest a bullish bias for Gold price, with a bounce from the 50-day SMA support. However, caution is advised as strong follow-through is lacking. Resistance near $2,448-2,450 could limit further upside, with potential for a challenge of the all-time peak near $2,483-2,484. A break above $2,500 could lead to further gains.
On the downside, support lies at $2,412-2,410 and $2,400, with strong support near the 50-day SMA at $2,373-2,372. A breach below could push Gold price towards the late July low around $2,353-2,352, signaling a bearish shift.
Understanding Gold: FAQs
- Gold is a safe-haven asset, used as a hedge against inflation and currency depreciation.
- Central banks hold Gold reserves to strengthen their currencies in times of uncertainty.
- Gold price is inversely correlated with the US Dollar and risk assets.
- Factors influencing Gold price include geopolitical instability, interest rates, and USD performance.