Gold (XAU/USD) Hits $2339 Amid Fed Rate Speculations and Geopolitical Risks

Gold (XAU/USD) is on the rise, reaching a one-week high in early European trading on Thursday, aiming to break through the pivotal 50-day Simple Moving Average (SMA) resistance.

GOLD Price Chart - Source: Tradingview

Recent U.S. macroeconomic data suggests easing inflationary pressures and a slowing economy, fueling speculation that the Federal Reserve may cut interest rates twice this year. This speculation has driven increased flows into the non-yielding yellow metal.

Geopolitical Tensions and Market Reactions

In addition to economic factors, geopolitical tensions and political uncertainty in Europe have bolstered the appeal of gold as a safe-haven asset. Despite the Federal Reserve’s more hawkish stance, which includes the likelihood of one rate cut in 2024, a rebound in U.S. Treasury bond yields has revived demand for the U.S. Dollar (USD). This resurgence could limit further gains for XAU/USD.

Interest Rate Uncertainty

Traders remain cautious, given the uncertainty about when the Federal Reserve will begin cutting interest rates. The Fed’s projection of only one rate cut this year, down from three projected in March, supports higher U.S. Treasury bond yields, thereby capping the upside for gold. However, disappointing U.S. Retail Sales data and weaker consumer and producer prices suggest that the Fed might ease monetary policy sooner, with market expectations pointing to a possible rate cut in September and another in November or December.

Escalating Geopolitical Risks

Geopolitical risks are also at play, with Ukrainian drone strikes on Russian energy infrastructure and Israel’s warning of an imminent war with Iran-backed Hezbollah. Additionally, concerns about fiscal discipline under a new French government are acting as tailwinds for safe-haven assets like gold, preventing significant price declines.

Upcoming Economic Events

Investors will closely watch the Swiss National Bank (SNB) decision and the crucial Bank of England (BoE) policy meeting, which could introduce volatility and provide further impetus to gold prices. In the U.S., key economic releases today include Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, Building Permits, and Housing Starts, all of which could impact market sentiment.

Economic Events to Watch Today

  • 12:30 USD Unemployment Claims: 235K (forecast), 242K (previous)
  • 12:30 USD Building Permits: 1.45M (forecast), 1.44M (previous)
  • 12:30 USD Philly Fed Manufacturing Index: 4.8 (forecast), 4.5 (previous)

The combination of easing inflation concerns, geopolitical tensions, and upcoming economic events suggests a mixed but potentially positive outlook for gold.

Gold Price Forecast: Technical Outlook

Gold (XAU/USD) is currently trading at $2339.25, reflecting a 0.61% increase. The pivot point at $2337.15 is critical for determining the next price movement. Immediate resistance levels are $2348.73, $2362.10, and $2374.72. On the downside, immediate support is noted at $2325.88, followed by $2311.19 and $2298.72.

GOLD Price Chart - Source: Tradingview

The Relative Strength Index (RSI) stands at 65, indicating strong momentum. The 50-day Exponential Moving Average (EMA) is at $2325.22. A double top pattern is forming resistance near the $2339 level, which is crucial for the next move.

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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