- Gold price bounces back above $2,450, as buyers eye $2,470 yet again.
- The US Dollar recovers with Treasury bond yields, despite a better mood.
- Gold buyers seem undeterred by the mixed Chinese activity data.
- Gold price stays within a symmetrical triangle, with a daily bullish RSI, ahead of US Retail Sales data.
Gold price has managed to find its feet above the $2,450 psychological level, looking once again to challenge the $2,470 key resistance in the lead-up to the US Retail Sales and Jobless Claims data releases.
Gold price awaits US Retail Sales for fresh cues on Fed policy
Gold price tested the abovementioned stiff resistance and turned south during Wednesday’s trading, especially after the release of the US Consumer Price Index (CPI) report.
Though the annual inflation rate in the US slowed for a fourth consecutive month to 2.9% in July 2024, the lowest since March 2021, compared to 3.0% in June and below forecasts of 3.0%, the monthly CPI rebounded 0.2% last month after falling 0.1% in June, the Labor Department’s Bureau of Labor Statistics (BLS) said on Wednesday.
These CPI indicators raised concerns whether the US Federal Reserve (Fed) would opt for a big interest-rate cut next month. Markets now see about 36% chance of a 50 basis points (bps) rate cut in September, down from 50% prior to the data release, according to the CME Group’s FedWatch Tool.
Reduced bets for a larger rate reduction by the Fed weighed on the non-interest-bearing Gold price even as the US Dollar (USD) tumbled alongside the US Treasury bond yields on the data release. The late recovery in the Greenback caused the USD-denominated bright metal yield a negative close near $2,450 on Wednesday.
Early Thursday, Gold buyers are back in the game, snapping a two-day pullback. Traders adust their positions once again ahead of the key US Retail Sales and Initial Jobless Claims data, which would provide fresh cues on the Fed’s interest-rate outlook. A weak US Retail Sales report could rekindle recessionary fears, underpinning the Gold price at the expense of the US Dollar.
Meanwhile, Gold price seems to find support from the ongoing Middle East geopolitical tensions. “Hamas said on Wednesday it would not take part in a new round of Gaza ceasefire talks slated for Thursday in Qatar, but an official briefed on the talks said mediators expected to consult with the Palestinian group afterward,” per Reuters.
Gold price technical analysis: Daily chart
As observed on the daily chart, the upper boundary of a symmetrical triangle formation near $2,470 continues to act as a tough nut to crack for Gold buyers.
If the rebound gathers traction, a daily closing above that level would be needed to confirm a triangle breakout. The 14-day Relative Strength Index (RSI) holds firm above the 50 level, adding credence to the constructive outlook for Gold price.
The next topside target is seen at the all-time high of $2,484, above which the $2,500 mark will be put to the test.
Conversely, failure to sustain at higher levels could once again test the bullish commitments near the previous day’s low of $2,438, below which the 21-day Simple Moving Average (SMA) support at $2,420 aligns.
Should the selling momentum intensify on a sustained break of the 21-day SMA, the next relevant support is seen at $2,380, where the lower boundary of the triangle and the 50-day SMA converge.
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.