Key Takeaways
- Gold prices are hovering around the $2,400 level, supported by geopolitical uncertainties and dovish Fed signals.
- The technical outlook is bullish, with key resistance at $2,425 and support at $2,391, $2,371, and $2,350.
- Fed officials’ comments and slowing inflation have increased market expectations for a rate cut in September.
- Powell’s upcoming speech and US political developments will be critical in shaping gold’s direction.
Market Dynamics and Recent Performance
Gold prices have shown significant bullish momentum, approaching the key psychological level of $2,400. This recent performance is largely driven by a combination of geopolitical uncertainties, dovish signals from the Federal Reserve, and a weakening US dollar. The market sentiment was influenced by an attempted assassination on former US President Donald Trump, which injected fresh political uncertainty and boosted safe-haven demand for gold. Additionally, the latest economic data from China indicated slower-than-expected growth, which further supported gold prices amid heightened expectations for economic stimulus measures from the Chinese government.
Technical and Fundamental Influences
Technically, gold’s daily chart exhibits a bullish setup. The 14-day Relative Strength Index (RSI) is holding firm above the 50 level, and the 21-day Simple Moving Average (SMA) has crossed above the 50-day SMA, indicating a bullish crossover. Gold is currently defending the $2,400 level, with a critical resistance at the recent high of $2,425. A break above this level could open the path towards the all-time high of $2,450 and potentially $2,500. Immediate support lies at $2,391, with further support at $2,371 and $2,350.
Fundamentally, the more accommodative tone from Fed officials has reinforced market expectations for rate cuts. San Francisco Fed President Mary Daly and Chicago Fed President Austan Goolsbee have both indicated that easing price pressures and a cooling labor market may justify rate reductions. This stance, combined with the recent Consumer Price Index (CPI) data showing a slowdown in inflation to 3.0% year-on-year, has bolstered the case for holding non-yielding assets like gold. Market participants are now pricing in a high probability of a rate cut in September, which has further weakened the US dollar and supported gold prices.
Looking Forward
The upcoming week will be crucial for gold, with traders closely monitoring Federal Reserve Chairman Jerome Powell’s speech at the Economic Club of Washington for further policy cues. Additionally, US political developments, particularly related to the aftermath of the Trump incident, will be in focus. Any new information that increases political uncertainty could provide additional support for gold. The economic calendar is relatively light in the first half of the week, but key data releases, including the Producer Price Index (PPI) and retail sales figures, could influence market sentiment.
