The price of gold is currently hovering near a two-week high, with investors anticipating a potential rate cut by the Federal Reserve in September. The rise in US bond yields is impacting the USD, which in turn is influencing the movement of gold prices. Despite the headwinds caused by the anticipated new supply of US Treasury bonds next week, the softer US economic data released on Thursday is reinforcing expectations for a Fed rate cut.
Various economic indicators are contributing to the uncertainty in the global economy. The number of Americans applying for unemployment insurance fell slightly, while housing starts and building permits saw a decline. Additionally, the Philadelphia Fed Manufacturing Index dropped unexpectedly. These factors, coupled with subdued US retail sales and easing inflation, are keeping the possibility of a September rate cut on the table, thus supporting the demand for gold.
Despite some Fed policymakers maintaining a hawkish outlook, the markets are pricing in the likelihood of another interest rate cut at the December policy meeting. Minneapolis Fed President Neel Kashkari believes that it may take some time for inflation to reach the 2% target, while Richmond Fed President Tom Barkin emphasizes the importance of a data-dependent approach in addressing policy issues. The potential for further rate cuts is bolstering the appeal of gold as a safe-haven asset.
From a technical standpoint, the recent close above the 50-day SMA is signaling a bullish trend for gold prices. Oscillators on the daily chart are also showing positive momentum, suggesting a further upward movement in the price of gold. The next key resistance level is around the $2,378-2,380 region, with a potential target of reaching the $2,400 mark. Conversely, immediate support is near the $2,345-2,344 area, followed by the $2,336-2,335 region, with a break below indicating a decline towards $2,300 and $2,285 support levels.
Investors are eagerly awaiting the release of flash PMI prints to gauge the health of the global economy. These indicators will likely provide some direction for market sentiment and potentially impact the movement of gold prices. Despite the ongoing economic uncertainties and geopolitical tensions, gold continues to be viewed as a safe-haven asset in times of market volatility.
The price of gold has shown resilience and strength in the face of global economic challenges. The anticipation of a Fed rate cut, coupled with supportive technical indicators, is likely to drive the price of gold higher in the coming days. As investors navigate through uncertain economic waters, gold remains a valuable asset for diversification and risk mitigation purposes.
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