Gold Above $2,400, Eyes Fed for Interest Rate Signals
Gold price (XAU/USD) shot to a multi-day peak around the $2,412-2,413 resistance zone on Tuesday and drew support from various factors.
Daily Digest Market Movers: Gold price bulls turn cautious ahead of the key central bank event risks
The latest geopolitical tensions in the Middle East and concerns over economic slowdown have driven gold prices to new multi-day highs. As the Israeli military launched attacks on Lebanon’s capital Beirut and targeted Hezbollah commanders, investors are growing cautious about the potential for an all-out war in the region. Meanwhile, the German economy contracted slightly in Q2, further adding to economic uncertainty. Despite a slight increase in US job openings and a modest rise in consumer confidence, the US Dollar’s momentum weakened as investors anticipate the start of the Federal Reserve’s rate-cutting cycle in September. Meanwhile, China’s manufacturing sector contracted for the third straight month in July, while services sector growth remained subdued. With these developments in mind, investors are eagerly awaiting the Bank of Japan’s policy decision for short-term direction, but the focus remains on the Federal Reserve’s upcoming policy update, which will ultimately dictate the trajectory of gold prices. As the central bank event risks loom large, gold bulls are turning cautious, but the metal’s safe-haven status could still provide support in the face of ongoing geopolitical and economic uncertainty.
Technical Analysis: Gold price finds acceptance above $2,400, seems poised to appreciate further
Digging into the technical charts, Gold has emerged victorious, surpassing the $2,400 milestone and displaying signs of further appreciation. The recent rally, initiated from the sturdy $2,350 support zone, which coincides with the 50-day Simple Moving Average (SMA), has fueled bullish sentiment among traders. This bullish momentum has been validated by oscillators on the daily chart, which have regained positive territory, indicating strong prospects for continued gains.
A decisive break above the $2,412-2,413 resistance area could act as a catalyst, propelling Gold towards last week’s swing high NEAR $2,432. This move would not only reinforce the bullish narrative but also signal the end of the corrective pullback from the month’s all-time high. With this momentum intact, the XAU/USD pair could aim higher, eyeing the intermediate resistance zone of $2,469-2,470, and potentially challenging the record peak in the vicinity of $2,483-2,484.
However, it’s crucial to keep an eye on potential reversal signals. The $2,400 level now acts as a pivotal defense for the bulls, safeguarding against immediate downside risks. Should this line of defense falter, the $2,383-2,382 region comes into play, followed by a potential retreat to the 50-day SMA, currently anchored near $2,359. A decisive breakdown below this crucial support level, coupled with a subsequent dip beneath last week’s swing low at $2,353, could ignite bearish sentiment, leaving the XAU/USD pair vulnerable to further declines.
In such a scenario, the next level of interest for bears would be the $2,325 area, which could provide temporary respite before Gold tests the psychologically important $2,300 mark. Thus, traders should closely monitor these key levels, as they will dictate the short-term trajectory of Gold prices and offer opportunities for both bullish and bearish strategies.
On the technical charts, oscillators on the daily timeframe have regained positive traction, signaling a shift in sentiment towards the upside. This bullish sentiment is reinforced by the potential for follow-through buying beyond the $2,412-2,413 resistance region, which could pave the way for a test of last week’s swing high near the $2,432 zone.
If the Gold price manages to sustain its strength beyond this level, it could signal that the corrective decline from the all-time peak earlier this month has run its course, and that the stage is set for further gains. In this scenario, the XAU/USD could climb towards an intermediate hurdle near the $2,469-2,470 region, with aspirations to challenge the record peak in the $2,483-2,484 zone.
However, it’s important to note that the $2,400 mark now serves as a crucial support level, as any significant retreat below this threshold could indicate a reversal in sentiment. In the event of a convincing break below this level, the Gold price could slide back towards the 50-day SMA, currently located near the $2,359 area. A subsequent fall below last week’s swing low around the $2,353 region would be a fresh trigger for bearish traders, potentially exposing the XAU/USD to further downside risks.
In such a scenario, the downward trajectory could extend towards testing the next relevant support near the $2,325 area, with the $2,300 round-figure mark serving as a potential downside target. Nevertheless, the current technical setup suggests that Gold prices are poised to appreciate further, with the $2,400 mark acting as a key pivot point for the near-term price action.
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What does the price of Gold depend on?
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status.
As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD).
A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
