Gold (XAU) Daily Outlook: Surges to $2405; Expecting Further Upside?
Gold prices (XAU/USD) have started the week on a bearish note, currently hovering around $2405 after touching an intraday low of $2405. The decline in gold can be attributed to the strengthening US dollar, which has gained traction despite growing expectations of a Federal Reserve rate cut in September.
The dollar’s ascent, bolstered by safe-haven demand following the attempted assassination of former President Donald Trump, has exerted downward pressure on gold. However, concerns over slower economic growth and lackluster retail sales in China may help cushion gold’s losses, given its traditional role as a hedge during economic uncertainties.
Looking forward, market focus remains on the imminent release of the Empire State Manufacturing Index from the US, which could present short-term trading opportunities. Additionally, Federal Reserve Chair Jerome Powell’s scheduled speech later today is eagerly awaited for further insights into the Fed’s monetary policy stance.
Impact of US Dollar Strength Amid Fed Rate Cut Expectations
Despite widespread expectations of Fed interest rate cuts starting in September, with a high probability of another cut in December, the US dollar has shown resilience. Market pricing indicates a more than 90% likelihood of a September rate reduction, supported by a recent tame US consumer inflation report. Moreover, the Producer Price Index (PPI) for final demand rose by 2.6% in June, surpassing expectations of 2.3%.
However, despite anticipated Fed easing and rising inflation concerns, the robustness of the US dollar may cap potential gains in gold as investors weigh economic stability against potential interest rate adjustments.
Economic and Political Factors Affecting XAU/USD Outlook in Mid-2024
Gold’s outlook remains supported by US political tensions following recent events involving former President Donald Trump, alongside economic challenges in China. China’s second-quarter economic growth slowed to 4.7% from 5.3% in the first quarter, with June’s retail sales increasing by only 2.0% year-over-year, below the anticipated 3.1%. Moreover, fixed asset investment grew less than expected at 3.9% year-to-date through June, against a forecast of 4.0%.
These factors, including geopolitical uncertainties and softer economic data from China, are likely to underpin higher gold prices due to increased safe-haven demand amid ongoing global uncertainty.
Short-Term Forecast
Gold prices are currently positioned above the key pivot point of $2405, indicating potential volatility ahead. A breakout above $2405 could trigger a rally towards the next resistance level at $2425, while a failure to sustain above this level might lead to a decline towards support at $2378.
Technical Analysis
Gold (XAU/USD) prices are delicately balanced above the pivotal $2405.18 mark, with a marginal daily gain of 0.02%. This level serves as a critical battleground where a decisive breach could pave the way for a bullish continuation towards the resistance at $2425.01. Conversely, a breakdown below $2405.18 may initiate a corrective move towards the 50-day Exponential Moving Average (EMA) at $2392.89, with further support seen at the $2378.65 level.
Traders are advised to closely monitor price action around the $2405.18 pivot point for potential directional cues amidst the heightened risk of market volatility.