Gold (XAU/USD) finds support from former range highs and bounces ahead of a crucial speech from Fed Chairman Jerome Powell. The speech is expected to shed light on Fed policy regarding interest rates, a significant driver for Gold prices.
Technically, XAU/USD has lifted off support and remains in an uptrend, although there are risks of a near-term reversal looming.
Gold’s Recovery Supported by Weaker US Dollar
Gold bounces past $2,490 as it rebounds from technical support at $2,470. The precious metal’s recovery is aided by a weaker US Dollar, to which it is negatively correlated. Additionally, lower US Treasury yields suggest expectations of future interest rate cuts, which is favorable for Gold as a non-interest paying asset.
The overall outlook for Gold remains positive as market participants await Powell’s speech at the central banker symposium in Jackson Hole. Powell is expected to confirm market expectations of a rate cut in September.
Gold Reacts to Negative US Data
Gold trades up half a percent after a previous decline of over 1.0%. The decline was influenced by reduced probability of a 0.50% rate cut in September, based on CME FedWatch data. Mixed PMI and Jobless Claims data, along with cautious comments from Fed officials, may have contributed to this recalibration.
Preliminary PMI data for August showed a slight decline, with US Manufacturing PMI falling below expectations while Services PMI slightly exceeded forecasts.
Technical Analysis: Gold’s Uptrend Intact
Gold corrects back to support at the top of its old range before bouncing back up. The short-term trend remains bullish, supporting a favorable outlook for the precious metal.
XAU/USD Daily Chart
While a break back into the range could change the outlook, Gold remains in a broad uptrend on medium and long-term time frames.
Gold FAQs
Gold has historical significance as a store of value and is considered a safe-haven asset in times of market turbulence. Central banks are major holders of Gold, using it to support their currencies and enhance economic strength. Gold’s price movement is influenced by factors such as geopolitical instability, interest rates, and the US Dollar.