- Gold prices rebound above $2,500 during Thursday's early European session.
- Expectations of a Federal Reserve rate cut and ongoing conflicts in the Middle East support the yellow metal.
- A stronger US Dollar could cap Gold’s potential gains.
Gold prices (XAU/USD) recovered some ground on Thursday, bouncing off weekly lows in the sub-$2,500 range per troy ounce. The anticipation of US interest rate cuts could boost gold demand, as lower rates decrease the opportunity cost of holding non-yielding gold. Additionally, political uncertainty in the US, geopolitical tensions in the Middle East, and global economic concerns support the precious metal’s upward movement.
However, renewed demand for the US Dollar (USD) may pressure the USD-denominated gold price, making gold more expensive for many buyers. Investors will closely watch Thursday's second estimate of US Gross Domestic Product (GDP) for Q2 for insights into the Federal Reserve's potential rate cuts. On Friday, the focus will shift to the US Personal Consumption Expenditures (PCE) Price Index data for July.
Daily Digest Market Movers: Gold Price Stays Strong Amid Growing Fed Rate Cut Expectations
Demand for gold is expected to remain strong, particularly from emerging markets such as China, India, and Turkey, according to John Reade, Chief Market Strategist at the World Gold Council.
“US data has not provided gold with additional support, increasing the temptation for traders to take profits after a sustained rally,” noted Ole Hansen, Head of Commodities Strategy at Saxo Bank A/S.
The second estimate for Q2 US Gross Domestic Product (GDP) is projected to show a 2.8% growth. The headline Personal Consumption Expenditures (PCE) Price Index for July is anticipated to rise by 2.6% year-over-year, up from 2.5% in June. Core PCE inflation is expected to increase from 2.6% to 2.7% year-over-year.
Rate futures markets have fully priced in a 25 basis points (bps) rate cut for September, with a 36.5% chance of a deeper cut, according to the CME FedWatch Tool. Traders are anticipating a total of 100 bps in Fed easing this year.
Technical Analysis: Gold Price Presents a Bullish Long-Term Outlook
Gold prices are trading positively today, though the metal remains constrained below the five-month-old ascending channel's upper boundary and the all-time high. Despite this, the overall outlook is bullish, with the price well above the key 100-day Exponential Moving Average (EMA) on the daily chart. The 14-day Relative Strength Index (RSI), positioned above the midline near 61.00, supports the potential for further upside.
The $2,530-$2,535 zone, where the all-time high and the upper boundary of the trend channel converge, serves as a critical resistance level. A sustained rally could push prices towards the $2,600 psychological mark.
Immediate support for XAU/USD is at the $2,500 level. A decisive drop below this support could lead to a notable decline towards $2,432, the low from August 15. The next support level is at $2,367, which aligns with the 100-day EMA.
US Dollar Price Today
The table below displays the percentage change of the US Dollar (USD) against major currencies today. The US Dollar showed the weakest performance against the New Zealand Dollar.
