The Gold price (XAU/USD) has pulled back from the monthly peak retested earlier this Tuesday, eroding some of the gains made the previous day. The positive risk tone in the equity markets and anticipation of US inflation data have caused bullish investors to lighten their bets on Gold. Despite this, geopolitical risks and expectations of a 50-bps rate cut by the Federal Reserve should help limit the downside for the precious metal.
Investors remain concerned about potential conflicts in the Middle East and the ongoing tensions between Russia and Ukraine, which support demand for safe-haven assets like Gold. Additionally, dovish expectations for the Federal Reserve’s monetary policy stance have failed to attract significant buyers for the US Dollar, which could benefit Gold as a non-yielding asset. It is advisable for traders to wait for further selling before confirming the end of the recent positive momentum seen in Gold over the past week.
Israel’s military operations near Khan Younis in Gaza and potential retaliation threats from Iran and Hezbollah, as well as Russia’s warning to Ukraine, contribute to market uncertainty and support Gold prices. The prospect of a larger interest rate cut by the Federal Reserve in September also acts as a positive factor for Gold. However, the overall risk-on sentiment and cautiousness ahead of US inflation data may cap the upside for Gold in the short term.
In terms of technical analysis, Gold price’s breakout above the $2,448-2,450 resistance level signals potential for further upside towards the record high near $2,483-2,484 and the psychological $2,500 mark. Conversely, a break below the $2,448 support could lead to a decline towards the $2,424-2,423 level, with further support at $2,412-2,410 and $2,400. The 50-day Simple Moving Average (SMA) near $2,376-2,375 is a crucial support level, below which the bearish bias may strengthen.
Overall, the Gold price is influenced by a combination of geopolitical tensions, Federal Reserve policy expectations, and market sentiment. While the positive risk tone and caution ahead of US inflation data may limit immediate gains, the underlying factors supporting Gold’s safe-haven appeal could help maintain its strength in the face of fluctuations. Traders should monitor key support and resistance levels to assess potential entry and exit points in their Gold trading strategies.
