Gold price (XAU/USD) saw a 1.5% intraday increase near $2,432 on Thursday due to escalating conflict in the Middle East. However, the positive move was capped at $2,470 following upbeat US macro data, easing recession fears in the US. This led to a rise in US Treasury bond yields and the US Dollar, along with a risk-on rally in US equity markets, limiting gains for gold. Despite this, gold settled with modest gains above $2,450 on Friday.
Investors anticipate the Fed to begin a rate-cutting cycle in September, keeping a lid on US bond yields and the USD, supporting gold. Market focus now shifts to US macro data and the upcoming FOMC meeting for short-term opportunities. Geopolitical tensions and Fed rate-cut expectations continue to influence gold price movement.
Market Update: Gold Price Faces Mixed Fundamentals
- Geopolitical tensions in the Middle East and Russia-Ukraine conflict boost gold as a safe-haven asset.
- US Retail Sales data for July beat expectations, easing fears of an economic slowdown.
- Jobless claims data also showed improvement, impacting Fed rate-cut expectations.
- Market reaction suggests a 25 basis points rate cut by the Fed in September, affecting gold price movement.
Technical Analysis: Key Levels for Gold Price Movement
Gold price needs to break above $2,470 for bullish control, aiming for $2,483-$2,484 and $2,500 levels. Failure to surpass $2,470 may lead to downside support at $2,447-2,445, $2,430-2,429, and $2,424. Further weakness could test the 50-day SMA at $2,383. Breaking below this level could push gold towards the 100-day SMA at $2,363 and late July lows at $2,353.
Gold FAQs: Understanding Gold as an Investment
- Gold is a safe-haven asset, used for jewelry, and a hedge against inflation and currency depreciation.
- Central banks hold significant gold reserves to support their economies during turbulent times.
- Gold has an inverse correlation with the US Dollar and US Treasuries, acting as a diversification asset.
- Gold price movement is influenced by geopolitical instability, interest rates, and US Dollar strength.
By analyzing geopolitical events, economic data, and technical levels, investors can better understand gold price movements and make informed decisions regarding their investments.