Gold price surges in Asian session as US Fed rate cut and Middle East tensions drive demand
- Gold price trades in positive territory in Monday’s Asian session.
- The US Fed rate cut and Middle East geopolitical risks continue to underpin the precious metal.
- The renewed US Dollar demand might cap the upside of the XAU/USD.
In a remarkable surge, the Gold price (XAU/USD) hits a record high on Monday, propelled by a weaker Greenback. The initiation of a monetary easing cycle by the Federal Reserve (Fed) and expectations of further rate cuts this year are likely bolstering the non-interest-bearing Gold price. Additionally, escalating geopolitical tensions in the Middle East are prompting fresh allocations towards safe-haven assets like gold.
Looking ahead, traders are closely monitoring the flash reading of the US Purchasing Managers Index (PMI) data due later on Monday. Any stronger-than-expected outcome could strengthen the USD and exert downward pressure on the USD-denominated Gold price.
Daily Digest Market Movers: Gold price holds firm amidst global influences
- “The forced liquidation of short positions may push the gold price higher into historical highs, as the US dollar generally holds its ground against a basket of major currencies, and rising bond yields create an unfavorable environment for gold,” said FxPro analysts.
- Hezbollah and Israel engaged in heavy fire on Sunday, with the Lebanese militant group launching missiles deep into northern Israeli territory following intense bombardment, as reported by CNN.
- Fed Philadelphia President Patrick Harker praised the US central bank’s effective navigation of a challenging economy in recent years, emphasizing the importance of both “hard” and “soft” data in decision-making.
- Fed Governor Michelle Bowman expressed support for adjusting the Fed funds rate level but preferred a more conservative initial move as the inflation target has not yet been reached.
- Fed Governor Christopher Waller defended the decision to cut interest rates by an accelerated 50 bps, suggesting a potential pause in rate adjustments based on future data.
Technical Analysis: Gold price holds steady above $2,600 amid RSI conditions
The Gold price continues its upward trajectory, maintaining a strong bullish trend on the daily timeframe with support above the key 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) indicates an overbought condition, suggesting the possibility of consolidation before any further price increases.
Approaching a major resistance area near the all-time high at $2,625, a decisive breakthrough could pave the way to the psychological level of $2,700. Conversely, a drop below the $2,600 level could lead to a retracement towards the support level at $2,560, with additional support at $2,485.
Gold FAQs
Gold has historically served as a store of value and medium of exchange, with its current status as a safe-haven asset making it an attractive investment during turbulent times. Central banks, including those in emerging economies like China, India, and Turkey, are increasing their Gold reserves to bolster their currency’s strength and solvency. Gold’s price movement is influenced by factors such as geopolitical instability, economic conditions, and the behavior of the US Dollar and US Treasuries.