Gold price (XAU/USD) experienced a turnaround from record highs, dropping over 1.5% following the release of US consumer inflation data. The decline in inflation reaffirmed expectations for a Fed rate cut in September, leading to a modest USD rebound and weighing on gold.
Despite the USD uptick, geopolitical tensions in the Middle East supported gold near $2,438. The metal gained traction during the Asian session but faces resistance from a stronger USD and positive risk sentiment in the market. Traders are now awaiting US Retail Sales data for further direction.
Daily Digest Market Movers: Gold Price Reacts to Dovish Fed Expectations
- US CPI data showed a moderate increase in July, reducing expectations for a larger rate cut by the Fed in September.
- Core CPI rose by 0.2% in July, easing annual inflation to below 3% for the first time in over three years.
- Investors now see a 36% chance of a 50-basis point rate cut at the next FOMC meeting, triggering a USD rebound and pressuring gold prices.
- Geopolitical tensions in the Middle East continue to offer support to gold amidst ceasefire negotiations between Israel and Hamas.
- Traders are focusing on US economic data for short-term trading opportunities.
Technical Outlook: Gold Price Bullish Above $2,424
The immediate support for gold is around $2,438, with further downside potential towards $2,424 and the 50-day SMA at $2,380. A break below could lead to deeper losses. However, positive oscillators support near-term gains towards $2,471-2,472 and potentially breaking the $2,500 mark.
Gold FAQs
- Gold is considered a safe-haven asset, used as a hedge against inflation and currency depreciation.
- Central banks hold the most gold reserves, adding 1,136 tonnes in 2022 to improve economic strength.
- Gold has an inverse correlation with the USD and US Treasuries, rising during market uncertainties.
- Price movements depend on factors like geopolitical instability, interest rates, and USD performance.
Analysis: Gold prices are influenced by various factors such as geopolitical tensions, inflation data, and USD performance. Understanding these factors can help individuals make informed decisions about investing in gold as a safe-haven asset or diversifying their portfolio during market uncertainties.