Gold prices are on the rise as markets react to disappointing Nvidia earnings, which have now become a macro event due to the company’s significant size and importance. Chinese demand for the precious metal is also contributing to the price increase. Technically, the XAU/USD trends sideways, with indications pointing towards a potential breakout higher in the near future, given the overall uptrend.
Factors Driving Gold Prices
Recent data from the World Gold Council (WGC) showed a revival in China’s demand for gold, with a 17% increase in net imports in July. This, along with a modest rise in net inflows from North American funds, has provided support for gold prices. Additionally, the weakening US Dollar, to which gold is negatively correlated, is also playing a role in the price increase.
Traders are closely monitoring upcoming US Jobless Claims and Gross Domestic Product (GDP) data for insights into the future path of US interest rates. The potential for a rate cut by the Federal Reserve in September is already priced into the market, but the size of the cut remains uncertain. Speculation around a 0.50% “mega cut” is still present, with implications for gold prices.
Technical Analysis and Predictions
Gold is currently consolidating within a mini-range, suggesting a sideways trend in the short term. However, the medium and long-term trends remain bullish, indicating a potential breakout higher in the future. A break above the $2,531 all-time high could confirm this upward momentum.
On the flip side, extreme long positioning poses a risk to gold prices, with some experts suggesting that the market is overcrowded with long trades. This sentiment has led to some investors taking a tactical short position in gold.
Conclusion and Analysis
Overall, the rise in gold prices can be attributed to a combination of factors, including disappointing Nvidia earnings, increasing Chinese demand, a weakening US Dollar, and speculation around potential Fed rate cuts. Traders and investors should closely monitor upcoming economic indicators and technical trends to make informed decisions about their gold investments. While the short-term outlook may be uncertain, the long-term bullish trend in gold prices suggests potential opportunities for investors in the future.