- Gold price kicks off the new week on a weaker note amid the emergence of some USD buying.
- Bets that the Fed will cut rates in September cap the USD gains and lend support to the metal.
- The US political uncertainty after Trump's assassination attempt contribute to limiting losses.
Gold price (XAU/USD) extends the downside during the early European session on Monday. The commodity, meanwhile, remains well within the striking distance of its highest level since May 22 touched last week and seems poised to appreciate further amid dovish Federal Reserve (Fed) expectations. In fact, market participants seem convinced that the Federal Reserve (Fed) will begin cutting interest rates in September, which, in turn, is seen acting as a tailwind for the non-yielding yellow metal.
Furthermore, the markets have been pricing in the possibility that the Fed will lower borrowing costs again in December. This fails to assist the US Dollar (USD) to capitalize on its modest recovery gains from over a three-month low and turns out to be another factor acting as a tailwind for the USD denominated-Gold price. Apart from this, the US political jitters in the wake of an alleged assassination attempt on former US President Donald Trump and China's economic woes validate the near-term positive outlook for the XAU/USD.
Daily Digest Market Movers: Gold price draw support from Fed rate cut bets, dismal Chinese macro data
- The US Dollar attracts some buyers on Monday and reverses a part of its recent losses to over a three-month low, which, in turn, is seen exerting some pressure on the Gold price for the second straight day.
- Data published by the US Bureau of Labor Statistics on Friday showed that the Producer Price Index (PPI) for final demand rose by 2.6% on a yearly basis in June, above consensus estimates for a reading of 2.3%.
- Adding to this, political uncertainty in the wake of a failed assassination attempt on US Presidential candidate Donald Trump benefits the Greenback, though dovish Federal Reserve expectations might cap gains.
- The current market pricing indicates over a 90% chance that the Fed will start its rate-cutting cycle in September and the bets were lifted by another tame US consumer inflation report released last Thursday.
- Furthermore, the US political situation should keep investors' appetite for riskier assets largely in check and lend some support to the safe-haven XAU/USD, warranting caution before positioning for deeper losses.
- The National Bureau of Statistics (NBS) reported earlier this Monday that China’s economy expanded by 4.7% over the year during the second quarter of 2024 as compared to a 5.3% expansion in the first quarter.
- Adding to this, China’s Retail Sales climbed 2.0% YoY in June vs. 3.1% expected and 3.7% prior, while the Fixed Asset Investment increased by 3.9% YTD YoY in June vs 3.9% expected and 4.0% last.
- The data pointed to heightened economic uncertainty and overshadowed the slightly better-than-anticipated release of Industrial Production figures, which came in at 5.3% YoY vs. 5.0% estimates.
- Traders now look to the release of the Empire State Manufacturing Index from the US for short-term opportunities ahead of Fed Chair Jerome Powell's speech later during the North American session.
Technical Analysis: Gold price seems poised to retest all-time peak, around $2,450 area touched in May
From a technical perspective, the emergence of some dip-buying on Friday reaffirmed strong support near the $2,390-2,388 resistance breakpoint. Moreover, oscillators on the daily chart are holding in positive territory and are still away from being in the overbought zone. This, in turn, suggests that the path of least resistance for the Gold price is to the upside. Hence, a slide back below the $2,400 mark might still be seen as a buying opportunity and remain limited.
Some follow-through selling, however, has the potential to drag the Gold price to the $2,358 region with some intermediate support near the $2,372-2,371 area. The subsequent fall might expose the 50-day Simple Moving Average (SMA) support, currently pegged near the $2,350 region.
On the flip side, last week's swing high, around the $2,425 region now seems to act as an immediate hurdle, above which the Gold price is more likely to aim back towards challenging the all-time peak, around the $2,450 region touched in May. A sustained strength beyond the latter will be seen as a fresh trigger for bullish traders and set the stage for an extension of the commodity's recent move-up witnessed over the past two weeks or so.
US Dollar price in the last 7 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.62% | -1.30% | 0.12% | -0.40% | -1.68% | 0.66% | 0.05% | |
| EUR | 0.62% | -0.69% | 0.73% | 0.22% | -1.06% | 1.28% | 0.67% | |
| GBP | 1.29% | 0.68% | 1.41% | 0.89% | -0.38% | 1.96% | 1.33% | |
| CAD | -0.12% | -0.74% | -1.44% | -0.53% | -1.83% | 0.55% | -0.08% | |
| AUD | 0.39% | -0.21% | -0.90% | 0.53% | -1.29% | 1.06% | 0.45% | |
| JPY | 1.67% | 1.05% | 0.38% | 1.78% | 1.30% | 2.32% | 1.72% | |
| NZD | -0.67% | -1.30% | -2.00% | -0.57% | -1.07% | -2.37% | -0.61% | |
| CHF | -0.04% | -0.68% | -1.37% | 0.06% | -0.48% | -1.74% | 0.62% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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