Gold price has been trading in negative territory for the past three days in the early Asian session. However, the rising US Fed rate cut bets and geopolitical risks may help limit Gold’s losses. Investors are eagerly awaiting the US August ISM PMI for fresh impetus. The stronger US Dollar and higher US Treasury bond yields on Tuesday have led to a decrease in the Gold price. Despite this, anticipation that the US Federal Reserve will cut interest rates in September might underpin the precious metal price, as lower interest rates reduce the opportunity cost of holding non-yielding gold. Geopolitical tensions in the Middle East could also boost safe-haven assets like Gold. Looking ahead, the ISM Manufacturing Purchasing Managers Index will be published on Tuesday, with the highlight for the week being the US Nonfarm Payrolls for August, which could determine the pace of the interest rate cut by the Fed and influence the Gold price in the near term.
Protests erupted across Israel on Monday over the government’s failure to secure a ceasefire-for-hostages deal with Hamas, following the killing of six hostages in Gaza. China’s Caixin Manufacturing PMI for August climbed to 50.4, exceeding market expectations. The US ISM Manufacturing PMI for August is expected to improve, while the Services PMI is estimated to drop. The US economy is expected to see job additions in August, with the Unemployment Rate ticking lower. Market expectations are currently pricing in a nearly 69% possibility of a 25 basis points rate cut by the Fed in September, with a 31% chance of a 50 bps reduction.
In terms of technical analysis, the Gold price has maintained positive momentum in the longer term. The daily chart indicates a constructive outlook for the precious metal, with the price well above the key 100-day EMA. The 14-day RSI also suggests the climb is more likely to resume than to reverse. The key resistance level for XAU/USD is in the $2,530-$2,540 zone, with a decisive break above potentially leading to a rally to the $2,600 psychological level. On the downside, initial support lies at the low of August 22, with further support at the 100-day EMA.
Gold has a significant role in human history as a store of value and medium of exchange, with its current status as a safe-haven asset during turbulent times. Central banks are the biggest Gold holders, diversifying their reserves and buying Gold to support their currencies in times of uncertainty. The inverse correlation of Gold with the US Dollar and US Treasuries, as well as its relationship with risk assets, makes it a popular choice for diversification. Gold prices can be influenced by factors such as geopolitical instability, interest rates, and the strength of the US Dollar. A strong Dollar tends to keep Gold prices controlled, while a weaker Dollar may push prices up. This relationship with the US Dollar plays a crucial role in determining the price of Gold.
