The Gold price has been on a downward trend, falling to near $2,400 in the American session. This decline is attributed to profit-booking after reaching all-time highs above $2,480 earlier in the week. The US Dollar’s recovery and increasing bond yields have also contributed to the drop in Gold prices. The Republican Party’s potential victory in the upcoming US Presidential elections has further boosted the US Dollar’s appeal, impacting Gold prices negatively.
There is speculation that Donald Trump may return as President, following an assassination attack on him. Additionally, there are concerns that Joe Biden might drop his re-election bid due to medical conditions, which could pave the way for a Trump victory. Trump’s protectionist trade policies are seen as beneficial for the US Dollar, leading to a higher Dollar Index value and making Gold investment more expensive. The rise in US Treasury yields further adds to the cost of holding Gold as an investment.
Expectations for the Federal Reserve (Fed) to begin reducing interest rates in September have also impacted Gold prices. As policymakers gain confidence that inflation is on track to reach the central bank’s target, the Fed is likely to move towards policy normalization next month. The June Consumer Price Index (CPI) reading indicated a slowdown in inflation, while the US labor market conditions have also influenced Fed rate-cut prospects. This could lead to a shift in investor sentiment towards Gold.
Investors are closely watching for cues from Fed policymakers regarding the timing of interest rate cuts, with speeches from officials like John Williams and Raphael Bostic scheduled for the New York session. The near-term appeal of Gold remains strong despite the current decline, as market expectations for the Fed’s policy changes continue to evolve. The Gold price correction to near $2,400 is part of a broader trend, with short-to-long-term moving averages indicating a positive outlook for the precious metal.
In the technical analysis of Gold prices, the metal has corrected to around $2,410 in the European session, failing to sustain above $2,450. The 14-day Relative Strength Index (RSI) suggests that the upside momentum has stalled, but the overall bias remains positive. Gold bulls are looking to the advancing trendline from the February low as a major support level. The fluctuating global currency market, as shown in the percentage changes of major currencies against each other, is also impacting the US Dollar and Gold prices.
In conclusion, the Gold price decline to near $2,400 is influenced by a combination of factors, including the US Dollar’s strength, increasing bond yields, and political uncertainties in the US. The Federal Reserve’s anticipated interest rate cuts in September are also a key driver of market sentiment towards Gold. Despite the current correction, the long-term outlook for Gold remains positive, with technical indicators suggesting a potential rebound in prices. Investors are closely monitoring developments in the US political landscape and Fed policy changes as they assess the future direction of Gold prices.
