The Gold price (XAU/USD) experienced a slight decline in Monday’s Asian session, nearing the $2,500 psychological support level. This dip may be offset by the expectation that the US Federal Reserve will begin cutting interest rates in September. Lower interest rates are typically positive for Gold as it reduces the cost of holding the non-interest paying asset. Additionally, geopolitical tensions in the Middle East and economic uncertainty are likely to boost safe-haven demand for Gold, although sluggish demand in the Chinese economy may pose a challenge, as China is the largest producer and consumer of gold globally. This week’s key economic data releases include the US Gross Domestic Product Annualized (GDP) for the second quarter and the Personal Consumption Expenditures-Price Index (PCE) for July.
Federal Reserve Chair Jerome Powell suggested policy adjustments are necessary, with expectations for a rate cut in September based on the July FOMC Minutes. Various Fed officials, including Philadelphia Fed President Patrick Harker and Chicago Fed President Austan Goolsbee, have expressed support for interest rate cuts. Additionally, ongoing tensions in the Middle East, as evidenced by Hezbollah’s attack on Israel, contribute to a favorable environment for safe-haven assets like Gold.
In terms of technical analysis, Gold price remains in a long-term bullish trend, supported by a five-month ascending trend channel and holding above the key 100-day Exponential Moving Average (EMA) on the daily chart. The Relative Strength Index (RSI) indicates a bullish trend, with potential for a rally towards the $2,530-$2,535 region. Support levels are identified at $2,470 and $2,432, with a crucial contention level around $2,350-$2,360.
In the past 7 days, the US Dollar weakened against major currencies, with the Japanese Yen emerging as the strongest performer. The heat map below shows the percentage change of the US Dollar against major currencies such as the Euro, British Pound, Canadian Dollar, Australian Dollar, Japanese Yen, New Zealand Dollar, and Swiss Franc.
Overall, Gold price faces a mixed outlook with potential positive drivers such as Fed rate cut expectations and geopolitical tensions offset by challenges like weak demand in the Chinese economy. Technical analysis indicates a bullish trend for Gold, while the US Dollar has weakened against major currencies in the past week. Monitoring key economic data releases and geopolitical developments will provide further insights into the future trajectory of Gold price movements.
