During Tuesday’s Asian session, the price of gold (XAU/USD) experienced renewed selling pressure, reversing gains from the previous day and approaching the pivotal 50-day Simple Moving Average (SMA) resistance. The stronger US Dollar (USD), bolstered by expectations of Federal Reserve interest rate cuts, contributed significantly to the downward movement. Additionally, a positive sentiment in equity markets diverted flows away from the safe-haven precious metal.
Investors are closely monitoring signals from the Federal Reserve regarding its rate-cutting trajectory. Recent US macroeconomic data, including the ISM Manufacturing PMI indicating continued contraction in June, reinforced expectations of rate cuts in September and December. This, coupled with declining US Treasury bond yields, may temper USD strength but continues to weigh on gold prices.
Geopolitical tensions, economic uncertainties in China, and political instability globally provide some support to gold, despite current pressures.
Market participants are cautious ahead of Federal Reserve Chairman Jerome Powell’s upcoming speech, scheduled for Tuesday, and the release of FOMC meeting minutes on Wednesday. The US Nonfarm Payrolls (NFP) report on Friday will further shape expectations regarding Fed policy, influencing sentiment around the USD and directing future movements in gold prices.
Technical Outlook: Potential Support and Resistance Levels for Gold
From a technical standpoint, gold faces resistance around the $2,337-2,338 range, corresponding to the 50-day SMA. A sustained breach above this level could lead to further gains towards the $2,360-2,365 zone, with potential for a rally towards the $2,400 mark and beyond, targeting the all-time high near $2,450 reached in May.
Conversely, a decline below support levels around $2,319-2,318, or the recent swing low, may find initial support near the psychological level of $2,300. Further downside could test the $2,285 horizontal zone and potentially the 100-day SMA near $2,258. Continued bearish momentum might push gold prices lower towards the $2,225-2,220 area, eventually targeting the $2,200 round-figure mark.
In summary, while current factors weigh on gold, upcoming economic data releases and Fed communications will be critical in determining whether the precious metal can find support and resume its upward trajectory amidst global economic uncertainties and monetary policy expectations.
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