Gold prices drifted lower on Thursday amid rebounding US bond yields and modest USD strength. Despite this, bets on a Fed rate cut should cap the attempted USD recovery and help limit any meaningful decline. Geopolitical risk could also support the safe-haven metal, warranting caution for bearish traders.
During the Asian session on Thursday, Gold price attracted some sellers and slid closer to the $2,500 psychological mark, although it managed to hold above the overnight swing low. The US Dollar gained some positive traction, snapping a four-day losing streak and reaching a fresh YTD low on Wednesday. This, coupled with the bullish sentiment in global financial markets, contributed to undermining the precious metal as a safe-haven asset.
However, expectations of a dovish Federal Reserve might cap the USD recovery and act as a positive factor for Gold price. Recent data showed weaker US job growth than initially estimated, while the July FOMC meeting minutes revealed officials leaning towards an immediate rate cut. This has fueled bets for an imminent start of the Fed’s easing cycle in September, which should benefit Gold as a non-yielding asset.
Moreover, the lack of progress in a truce agreement between Israel and Hamas presents a risk of broader conflict in the Middle East, which could support Gold price. This caution should be considered by bearish traders before confirming that the metal has topped out in the near term.
In terms of technical analysis, a bullish consolidation phase is seen before a potential move towards retesting the all-time peak around the $2,531-2,532 area. Oscillators on the daily chart signal positive territory, supporting a near-term constructive outlook. Any pullback might find support near the $2,500 mark, with a break below the $2,480 triple top resistance breakpoint potentially leading to further downside towards the $2,430 region.
The US Dollar dived to a YTD low on Wednesday, prompting a reversal in Gold price from sub-$2,500 levels. Preliminary employment data showed weaker job growth estimates, while FOMC meeting minutes indicated support for a rate cut in September. The ongoing uncertainty in the Middle East also provides support to Gold, with traders awaiting US economic data releases for short-term opportunities.
Gold price bulls currently have the upper hand, with a potential move towards the all-time peak. Any pullback might attract buyers near the $2,500 mark, while technical selling could occur if the triple top resistance breakpoint at $2,480 is broken. The market focus remains on Fed Chair Powell’s speech on Friday, as well as upcoming US economic data releases.
In conclusion, Gold price is influenced by factors such as US bond yields, USD strength, Fed rate cut expectations, and geopolitical risk. The technical outlook suggests a bullish consolidation phase before a potential move towards the all-time peak. Traders should remain cautious amid ongoing uncertainty in the market and await further developments to determine the metal’s future direction.
