Gold prices dropped to $2,399, down 1.50%, after reaching a high of $2,447. This decline was attributed to traders booking profits before the weekend. The XAU/USD is currently trading at $2,399 after hitting a high of $2,447 and may end the week with losses close to 1% after a record high of $2,483.
China’s economic growth concerns and speculation about former President Donald Trump’s potential re-election in November have boosted the Greenback, leading to gains in the US Dollar Index (DXY). Traders are closely monitoring these factors as they impact market sentiment.
Reports circulating that US President Joe Biden may withdraw from the race, coupled with statements from high-level Democrats indicating that Trump could win the election, have contributed to market uncertainty. Despite Federal Reserve policymakers adopting a slightly dovish stance, the US Dollar remains strong, with the IMF suggesting that interest rates should not be cut until late 2024.
The US Dollar Index is up by 0.18% at 104.34, while US Treasury bond yields are climbing, with the 10-year Treasury note yielding 4.233%. These movements in the market have a direct impact on gold prices.
Weaker-than-expected US Consumer Price Index (CPI) data pushed Gold prices above $2,400 as the possibility of Fed rate cuts drove down US Treasury bond yields. Market data from the week, including mixed Retail Sales readings and a slowdown in Industrial Production, reinforced the Fed’s stance that its dual mandate has become more balanced.
Gold prices are currently experiencing a pullback, indicating that traders are taking profits following an 8% rally since June 27. The Relative Strength Index (RSI) remains bullish, but momentum favors sellers in the near term. Key support levels for XAU/USD include $2,392, the 50-day Simple Moving Average (SMA) at $2,357, and $2,350, followed by the 100-day SMA at $2,312.
Central banks are significant gold holders, with the precious metal seen as a safe-haven asset and a hedge against inflation and depreciating currencies. Central banks worldwide have been increasing their gold reserves, with emerging economies such as China, India, and Turkey leading the way. Gold’s correlation with the US Dollar and US Treasuries, as well as its status as a safe-haven asset, make it a popular investment choice during uncertain economic times.
