Gold Price Forecast: XAU/USD battles $2,400, with eyes on US politics and Powell
- Gold price holds correction to near $2,400 early Monday amid a mixed market mood.
- The US Dollar tracks Treasury bond yields higher, taking account of the Trump attack.
- Gold price stays bullish amid a favorable daily technical setup and ahead of Fed Chair Powell’s speech.
Gold price is defending the $2,400 threshold early Monday, holding its corrective mode from a two-month top set at $2,425 on Thursday.
Gold price looks to US politics and Powell
The subdued performance in Gold price could be attributed to a broad-based US Dollar (USD) rebound alongside firmer US 10-year Treasury bond yields, as investors digest Saturday’s fateful incident at former US President Donald Trump’s Pennsylvania rally, where several bullets were shot and one such shot ripped the upper part of his right ear.
The assassination attempt on ex-US President Trump fuelled a fresh bout of risk-aversion in the early Asian hours, helping the Greenback stage a modest comeback after the previous week’s slump. The attack made Trump’s victory more likely, although it poses a new level of political uncertainty for markets, lifting the US Treasury bond yields higher at the expense of the government bonds.
Amidst broad US Dollar firmness and higher yields, the non-yielding Gold price remains on the back foot. The Gold price downside, however, appears capped amid slower-than-expected China economic growth and heightened bets for a US Federal Reserve (Fed) interest-rate cut in September.
Data released by the National Bureau of Statistics (NBS) showed Monday that the world's second-largest economy grew 4.7% year-on-year in April-June, slowing from 5.3% in the previous three months while recording the weakest growth since the third quarter of 2023. The market forecast was for a 5.1% readout. Dwindling Chinese growth prospects fan expectations that China could roll out stimulus measures sooner rather than later to stimulate the economy.
Meanwhile, markets are now pricing in an over 90% chance that the Fed will lower rates in September, especially after the US Consumer Price Index (CPI), released last Thursday, climbed 3.0% YoY in June, slowing from a 3.3% increase in May and below the 3.1% expected print.
Later in the day, Gold traders will pay a close ear to Fed Chairman Jerome Powell’s appearance at the Economic Club of Washington for fresh policy cues and their implications on the bright metal. Additionally, US political developments will grab attention, as they could have a significant impact on the value of the USD and the Gold price.
Gold price technical analysis: Daily chart
Gold price remains on track to retest the all-time high at $2,450, as the 14-day Relative Strength Index (RSI) holds firm above the 50 level.
Further, the 21-day Simple Moving Average (SMA) settled above the 50-day SMA on Friday, confirming a Bull Cross and making another case for additional upside in Gold price.
Gold buyers, however, need to yield a decisive break above the two-month high of $2,425 to challenge the record highs of $2,450.
A sustained move above the latter will open the door toward the $2,500 key level.
On the flip side, Gold price could face immediate support at Friday’s low of $2,391 should the correction gather strength.
The next relevant downside cushion is seen at the July 11 low of $2,371, below which the $2,350 psychological level could act as a tough nut to crack for Gold sellers.
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.
Premium
You have reached your limit of 3 free articles for this month.
Start your subscription and get access to all our original articles.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
