Gold (XAU/USD) continues to decline, trading in the $2,490s as risk sentiment turns negative after weak US manufacturing data. Despite its safe-haven status, Gold is not seeing an increase in value, possibly due to overcrowded long positioning by Commodity Trading Advisors (CTA) and institutional investors. The precious metal finished Tuesday down over a quarter of a percent, breaking below the key $2,500 level, signaling a bearish trend.
Gold Ignores Increased Probability of Fed Rate Cut
Market-based probabilities show an increased chance of the US Federal Reserve opting for a 0.50% interest rate cut in September, but Gold fails to capitalize on this. The odds of a larger cut have risen to 41%, which would typically be bullish for Gold as it lowers the opportunity cost of holding the precious metal. However, other economic indicators, such as US employment data, could still impact the outlook for interest rates.
Upcoming data releases, including US JOLTS Job Openings, ADP Employment Change, and Jobless Claims, will provide further insight into the state of the US job market. The main event will be the US Nonfarm Payrolls (NFP) report on Friday, which could influence the Fed’s decision on interest rates.
On the geopolitical front, tensions are rising in various regions, but these have not translated into increased demand for Gold. Despite recent events, including attacks in Ukraine and protests in Israel, Gold prices remain steady.
Technical Analysis: Gold’s Range-Bound Movement
Gold continues to oscillate within a messy range below its previous all-time highs of $2,531. While it has broken below the key $2,500 support level, it remains above the next key level at $2,470-$2,460. The medium and long-term trends for Gold are bullish, suggesting a potential breakout higher in the future.
If Gold can break above the August 20 all-time high, it could signal a continuation higher towards the $2,550 target. However, a decisive break below the $2,470-$2,460 level would change the outlook for Gold and indicate a more significant downtrend.
Overall, despite negative market sentiment and increased probabilities of a Fed rate cut, Gold is struggling to gain momentum. Investors should keep an eye on upcoming economic data releases and geopolitical events to gauge the future direction of Gold prices.