The gold price is currently hovering near a two-week high due to market expectations of a rate cut by the Federal Reserve in September. This anticipation of a rate cut has bolstered the XAU/USD pair, despite the rise in US bond yields, which in turn supports the US Dollar and acts as a ceiling for gold prices. Factors such as softer US economic data, including lower than expected jobless claims and a decline in housing starts and building permits, have reinforced market expectations for the Fed to start an easing program soon.
The dovish outlook of the Bank of England and recent rate cuts by the European Central Bank and the Swiss National Bank have further lifted sentiment for gold. These central bank policy decisions, along with a breakout above the 50-day SMA, indicate a bullish trend for gold prices. The path of least resistance seems to be to the upside, with any corrective slide likely viewed as a buying opportunity by traders.
The possibility of a rate cut in September and the market pricing in another cut in December are contributing to the positive outlook for gold prices. Despite some Fed policymakers expressing a more hawkish stance, economic indicators pointing towards easing inflation and tepid retail sales figures keep the door open for rate cuts. Minneapolis Fed President Neel Kashkari and Richmond Fed President Tom Barkin have highlighted the resilience of the US economy and suggested that it may take some time to meet inflation targets.
From a technical standpoint, the gold price has closed above the 50-day SMA, signaling a bullish trend. Oscillators on the daily chart also show positive momentum, supporting the possibility of further appreciation in gold prices. The next significant resistance levels to watch for are around the $2,378-2,380 region, with the potential for a move towards the $2,400 mark. On the downside, immediate support lies near the $2,345-2,344 area, followed by the $2,336-2,335 region. A break below these levels could see gold prices testing the $2,300 mark and the $2,285 horizontal support.
The gold price is being influenced by a combination of market sentiment, central bank policies, Federal Reserve rate cut expectations, and technical indicators. While economic data and Fed policymakers’ comments may provide short-term fluctuations, the overall outlook remains positive for gold prices. Traders will likely continue to monitor key levels and economic releases for cues on future price movements in the precious metal market.