Gold Price Forecast: XAU/USD looks north as a Big week kicks in
- Gold price sees a positive start to the week early Monday, $2,400 tested.
- US Dollar drops with US Treasury bond yields on dovish Fed bets and risk-on mood.
- Renewed Middle East concerns underpin the safe-haven Gold price.
- Gold buyers eye a daily close above 21-day SMA for a sustained recovery.
Gold price is building on its previous recovery early Monday, having defended the key support at $2,360 on a weekly closing basis. Gold buyers fight back control heading into the critical central banks’ bonanza week, with the US Federal Reserve (Fed) – the main event risk for the bright metal.
Gold price kicks off the Fed week on strong footing
The renewed upside in Gold price could be attributed to the extension of Friday’s risk-recovery into Asia, as Asian stocks track the Wall Street rebound amid a bout of profit-taking ahead of a key week.
Risk-flows diminish the appeal of the safe-haven US Dollar while the US Treasury bond yields bear the brunt of increased expectations of a dovish Fed hold this week. Markets are fully pricing in a Fed rate cut in September, according to the CME Group’s FedWatch Tool. Another cut remains on the table for December.
Additionally, over the weekend, fresh tensions in the Middle East spark a flight to safety in the traditional safety net, Gold price, reinforcing the buying interest in the yellow metal.
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.
On Friday, Gold price staged an impressive rebound from near two-week lows of $2,353 after the Greenback turned south after the core PCE price index data, the Fed’s preferred inflation gauge, steadied at an annual pace of 2.6% in June, driving up optimism that the central bank will begin cutting rates in September.
Gold markets remain expectant of the potential dovish policy outlook from the Fed and the Bank of England (BoE) later in the week while the developments surrounding the Middle-East geopolitical tensions will remain in focus.
Gold price technical analysis: Daily chart
Gold buyers jumped back into the game after the bright metal yielded a weekly closing above the key 50-day Simple Moving Average (SMA) at $2,360. At that level, the month-long rising trendline support coincides, making it a strong support.
The 14-day Relative Strength Index (RSI) also reclaimed the 50 level, currently near 52.50, turning the tide back in favor of Gold optimists.
Acceptance above the previous support of the 21-day SMA at $2,392 is needed on a daily closing basis to extend 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, Gold price needs a daily close below the abovementioned key confluence support at $2,360 to initiate a fresh downtrend toward the 100-day SMA support at $2,327.
Buyers, however, could find some comfort at the $2,350 psychological level.
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).
Read more.Next release: Wed Jul 31, 2024 18:00
Frequency: Irregular
Consensus: 5.5%
Previous: 5.5%
Source: Federal Reserve
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.
