Gold Analysis: Will Gold Break New Historical Levels?
- Yesterday, the gold price fell towards the support level of $2,503 per ounce but quickly rebounded to stabilize around the resistance level of $2,525 per ounce.
- Obviously, that’s because of global geopolitical tensions expanded and central banks globally abandoned tightening, suggesting to investors and markets that the gold price is poised for new record-breaking upward breakthroughs.
Yesterday's decline in the gold price came despite more solidified expectations of US interest rate cuts this year and rising geopolitical risks. Last week, Federal Reserve Chairman Jerome Powell confirmed US interest rate cuts in September, indicating that the US central bank is ready to start cutting rates as US inflation approaches its target of 2%, while also expressing concerns about a weakening Labor market. San Francisco Federal Reserve President Mary Daly echoed Powell's dovish stance on Monday, saying that "the time has come to adjust policy." Similarly, Richmond Federal Reserve President Barkin said that while he still sees upside risks to inflation, he supports "cutting" interest rates in response to a slowing Labor market.
Moreover, escalating geopolitical tensions in the Middle East have increased demand for safe-haven assets such as gold.
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1Factors Affecting the Gold Market
The dollar price is stabilizing with safe-haven demand. According to Forex trading, the US Dollar Index (DXY) stabilized at around 100.9 on Tuesday after hitting a 13-month low in the previous session, supported by increased demand for safe-haven assets amid rising geopolitical risks in the Middle East. Israel and Hezbollah exchanged missile strikes over the weekend, raising fears of a wider conflict in the region that could involve Iran.
However, the US dollar remains under pressure from expectations that the Federal Reserve will begin cutting US interest rates soon. In this regard, Federal Reserve Chairman Powell said in his Jackson Hole speech on Friday that the time had come to adjust policy amid growing risks to the Labor market, while expressing confidence that inflation would return to the central bank's 2% target. Meanwhile, data on Monday showed that US durable goods orders rose more than expected in July. Now, markets are looking to the latest initial jobless claims and the Federal Reserve's preferred Personal Consumption Expenditures price index later this week for more clarity on the path of interest rates.
Another factor affecting the gold market, the yield on 10-year US Treasury bonds has stabilized with anticipation of more data. According to electronic trading, the yield on 10-year US Treasury bonds stabilized above 3.8% on Tuesday as investors looked to key economic data this week that could shed light on the path of Federal Reserve monetary policy. The market will closely examine the latest initial jobless claims, the second estimate of second-quarter GDP, and the July Personal Consumption Expenditures price index report.
On Monday, data showed that durable goods orders rose more than expected in July. At the same time, US bond yields remained under pressure from expectations that the Federal Reserve will begin cutting US interest rates soon.
Gold Price Forecast and Analysis Today:
The overall trend for the gold price remains upward and may remain so for some time if global geopolitical tensions continue to rise and central banks globally abandon tightening their policies, along with the continued purchase of gold bullion for hedging. Technically, the nearest resistance levels for gold are currently $2,533, $2,550, and $2,575, respectively. Obviously, caution is advised as all technical indicators are at strong overbought levels. Ultimately, if the dollar recovers and global tensions subside, the gold price may be subject to strong selling to take profits.
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