Gold Price Forecast: XAU/USD bull-bear tug-of-war in play, focus shifts to key EU/ US events
- Gold price extends a two-day losing streak early Tuesday but stays in a familiar range.
- Despite sluggish US Treasury bond yields, US Dollar holds the previous upwing as risk-off mood underpins.
- Gold price remains stuck between two key daily moving averages, as the BoJ and the Fed policy decision loom.
Gold price is treading water below $2,400 early Tuesday, as Gold traders turn to the sidelines ahead of a bunch of upcoming high-high macro news from the US and Europe.
Gold price stays cautious ahead of key EU/ US event risks
Traders seem non-committal and refrain from placing fresh bets on the Gold price, as the policy announcements from the US Federal Reserve (Fed) and the Bank of Japan (BoJ), due on Wednesday, remain in the spotlight.
Besides, they also brace for the Gross Domestic Product (GDP) reports from Germany and the Eurozone slated for release later on Tuesday. Germany is also due to publish its inflation data.
Additionally, the US JOLTS Job Openings data will grab the eyeballs in American trading. These data releases will likely shed light on the state of the economies on both sides of the Atlantic, having a significant impact on the broader market sentiment and the safe-haven US Dollar.
Therefore, Gold price’s fate hinges on the upcoming data flow and the central banks’ policy announcements, with the BoJ likely to debate the timing of the next rate hike while the Fed is seen opening the door for rate cuts.
Gold price witnessed good two-way price action on Monday, initially extending last week’s late recovery before sellers returned on a failure to resist above the $2,400 threshold.
The Asian advance in Gold price could be associated with fresh tensions in the Middle East over the weekend. On Saturday, 12 children and young adults were killed in a rocket strike while playing football in the Israeli-occupied Golan Heights. The Israel Defense Forces (IDF) blamed the Iran-backed militant group, Hezbollah for the attack, saying that it conducted air strikes against seven Hezbollah targets "deep inside Lebanese territory".
The rising tensions have the potential to trigger an all-out war between Israel and Hezbollah, which has prompted investors to scurry for safety in Gold price.
Additionally, the US Dollar remained on the back foot alongside the US Treasury bond yields on increased dovish Fed expectations, allowing Gold price to attract buyers. However, in the second half of the day, risk-aversion returned and lifted the demand for the safe-haven US Dollar, triggering a sharp pullback in Gold price from a three-day top of $2,403.
Gold price technical analysis: Daily chart
The bullish sentiment around the Gold price seems to have evaporated heading into the critical macro events, leaving Gold price without any clear directional bias so far this Tuesday.
The 14-day Relative Strength Index (RSI) flirts with the 50 level, retreating from the positive territory, justifying a neutral outlook for Gold price.
The bright metal remains stuck between the 21-day Simple Moving Average (SMA) resistance at $2,394 and the 50-day SMA at $2,359. The rising trendline coincides with the 50-day SMA, making it a strong support.
Acceptance above the previous support of the 21-day SMA at $2,394 is needed on a daily closing basis to resume the recovery toward the $2,400 mark.
The next upside targets are seen at the $2,412 area and the $2,425 static resistance.
On the flip side, the Gold price needs a daily close below the abovementioned key confluence support near $2,360 to initiate a fresh downtrend toward the 100-day SMA support at $2,329.
Buyers, however, could find some comfort at the $2,350 psychological level.
(This story was corrected on July 30 at 06:15 GMT to say that "the bright metal remains stuck between the 21-day Simple Moving Average (SMA) resistance at $2,394 and the 50-day SMA at $2,359.")
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.
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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.
