Gold prices saw some selling on Tuesday morning in Europe, ending a two-day streak of gains. While expectations of a US rate cut later this year and increasing geopolitical tensions might limit any further decline in gold prices, investors are keeping an eye on the upcoming US Conference Board Consumer Confidence and Housing Price Index data set to be released on Tuesday.
Currently, gold (XAU/USD) is trading in negative territory due to a modest rebound of the US Dollar (USD). However, the signal from US Federal Reserve Chair Jerome Powell at the Jackson Hole symposium suggesting the possibility of rate cuts might bolster gold prices. Lower interest rates are generally beneficial for gold as they lower the cost of holding non-yielding assets. Additionally, rising geopolitical risks in the Middle East could further support gold, a traditional safe-haven asset.
In China, the People's Bank of China (PBOC) paused gold purchases in July, marking the third consecutive month of no acquisitions for reserves. Traders are looking for August data for further insights. Concerns about China’s sluggish economy and demand for precious metals might weigh on gold prices, considering China is the largest global producer and consumer of gold.
Upcoming economic data includes the US Conference Board’s Consumer Confidence for August and Housing Price Index for June. Later in the week, attention will turn to the preliminary US Gross Domestic Product (GDP) for the second quarter and the Personal Consumption Expenditures (PCE) Price Index.
Market Overview:
Gold prices are losing ground, but the potential for a significant decline appears limited. US Air Force General C.Q. Brown noted that immediate fears of a broader Middle East conflict have eased following recent exchanges of fire between Israel and Hezbollah, though Iran still poses a significant threat. In ceasefire negotiations, Hamas has rejected new Israeli conditions and demands adherence to proposals from President Joe Biden and the UN Security Council.
Federal Reserve Bank of San Francisco President Mary Daly has indicated support for beginning rate cuts, aligning with Powell's recent remarks at the Kansas City Fed's annual economic symposium. The US Durable Goods Orders rose sharply by 9.9% MoM in July, a notable increase compared to June’s -6.9% contraction, surpassing the expected 4% rise.
According to the CME FedWatch Tool, the markets have fully anticipated a 25 basis point rate cut, with the probability of a larger cut now at 30%, down from 36.5% last Friday.
Technical Analysis:
Gold prices have edged lower but maintain a generally positive outlook, supported above the 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) remains above the midline near 92.95, suggesting ongoing strength.
If gold manages to break through resistance levels and maintains bullish momentum above the $2,530-$2,540 range, it could aim for the $2,600 psychological barrier. Conversely, a drop below the August 22 low of $2,470 could attract more sellers and push gold towards the next support level at $2,432, the August 15 low. Key support levels to monitor are between $2,360 and $2,370, encompassing the lower limit of the trend channel and the 100-day EMA.
US Dollar Performance Over the Past Week
The table below illustrates the percentage change of the US Dollar (USD) against various major currencies over the past week. The US Dollar showed its weakest performance against the Swiss Franc.
