Gold Soars Above $2,500 as Safe-Haven Demand Surges – Quick Outlook
Gold prices (XAU/USD) are currently under pressure, trading near $2,498.43 per ounce after hitting an intraday low of $2,497.65.
Gold prices (XAU/USD) are currently under pressure, trading near $2,498.43 per ounce after hitting an intraday low of $2,497.65.
This decline is primarily driven by a modest recovery in the US dollar and a prevailing risk-on sentiment in the markets.
Despite the growing speculation around a potential Federal Reserve rate cut in September, the US dollar’s resurgence is adding to the downward pressure on gold prices.
1/3 #Gold futures surpassed $2,500 USD last Friday🥇
December futures for the precious metal closed at $2,537 USD, rising 2.8% last week, driven by a weaker dollar and increasing expectations that the Federal Reserve will announce a 25 bps rate cut at its September meeting… pic.twitter.com/QZbpBw2ZPc— Bullish Securities – Commodities🌾🛢️🪵 (@BullishCMD) August 19, 2024
Additionally, diminishing fears of a sharp US economic slowdown have bolstered market confidence, reducing gold’s appeal as a safe-haven asset.
Impact of US Dollar Strength and Fed Rate Cut Speculation
The US dollar’s recovery has played a significant role in gold’s recent decline. A stronger dollar tends to make gold more expensive for holders of other currencies, leading to reduced demand.
Even as market participants speculate about a possible rate cut by the Federal Reserve in September, the dollar’s resilience suggests that investors are still seeking clearer signals from the Fed regarding its monetary policy stance.
Dollar Hits Seven-Month Low Amid Rate Cut
The dollar hovered at a seven-month low due to anticipated rate cuts, with traders eyeing Powell's Friday speech. The euro and sterling reached recent highs. #DollarWeakness #InterestRates #FederalReserve #Euro #Sterling #Jocomms pic.twitter.com/3q7V630SQX
— J.O. Comms (@jo_comms) August 20, 2024
The market’s expectations for aggressive rate cuts have also softened following a strong Retail Sales report for July, which alleviated some recession concerns.
This development has made traders more cautious, as the reduced likelihood of an aggressive rate cut diminishes the immediate appeal of gold as a hedge against economic uncertainty.
Upcoming Fed Signals and Market Sentiment
Looking ahead, traders are eagerly anticipating the release of the July FOMC meeting minutes on Wednesday and Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium on Friday. These events are expected to provide more clarity on the Fed’s monetary policy trajectory.
The CME Group’s FedWatch Tool indicates a likely start to rate cuts in September, with a potential reduction of over 200 basis points by the end of 2025.
Several Federal Reserve officials have weighed in on the potential for rate cuts. Minneapolis Fed President Neel Kashkari has suggested that discussing rate cuts in September is appropriate due to shifting risks.
In contrast, Chicago Fed President Austan Goolsbee has cautioned against maintaining restrictive policies for too long, while San Francisco Fed President Mary Daly advocates for a gradual approach to lowering rates.
Technical Analysis: Key Levels to Watch
Gold (XAU/USD) is currently trading at $2,512.66, marking a slight decline of 0.09%. The key level to watch is the pivot point at $2,523.98, which is likely to determine the short-term direction of the market.
Immediate resistance is found at $2,524.11, with further resistance levels at $2,540.75 and $2,556.71. On the downside, support is seen at $2,491.41, with additional support at $2,480.08 and $2,461.80.
The Relative Strength Index (RSI) is currently at 66, indicating that gold is nearing overbought territory, which could signal a potential correction.
Additionally, the 50-day Exponential Moving Average (EMA) is positioned at $2,459.26, providing strong support for the current uptrend.
Conclusion
Given the current technical setup, if gold breaks above the pivot point of $2,523.98, it could lead to further bullish momentum. However, if the price falls below $2,491.41, a deeper correction might ensue.
Traders should consider buying above $2,508, targeting $2,523, with a stop loss at $2,490. A break below $2,491.41 could trigger further downside pressure.
As always, the market remains sensitive to upcoming Fed signals and broader economic data, making it crucial to stay vigilant in the coming days.
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