Gold Price Forecast: XAU/USD holds steady above $2,450 on positive US Retail Sales data

Gold price trades flat around $2,455 in Friday’s early Asian session.
US July Retail Sales beat expectations, rising 1.0% MoM; Initials Jobless Claims fell 7K to 227K last week.
The escalating geopolitical risks in the Middle East might cap the Gold’s downside.

Lallalit Srijandorn FXStreet

Gold price (XAU/USD) flat lines near $2,455 during the early Asian session on Friday. The yellow metal seesaws between gains and losses amid the consolidation of the US Dollar (USD). Traders will focus on the preliminary of the US Michigan Consumer Sentiment Index for August, along with the Building Permits and Housing Starts.

Following the release of encouraging employment-related data and strong retail sales, speculative interest in the world's biggest economy decreased, easing fears about a potential recession. However, traders still see the US Federal Reserve (Fed) start easing the policy in September. According to the CME FedWatch Tool, the markets are now pricing in a nearly 80% chance of a September rate cut and expect 200 basis points (bps) of reduction in the next 12 months, though that will depend on incoming data.

Data released by the US Census Bureau on Thursday showed that Retail Sales in the United States rose by 1.0% MoM in July, compared to a decline of 0.2% in June. This figure surpassed the estimation of a 0.3 increase. Meanwhile, the Initial Jobless Claims for the week ending August 10 arrived at 227K, better than the expectation of 235K and down from the previous week of 234K. The recent stronger job data and upbeat Retail Sales have strengthened the USD broadly and weighed on the precious metal.

Nonetheless, the elevated geopolitical risks in the Middle East might provide some support to Gold price, a traditional safe-haven asset. Gaza’s Health Ministry says more than 40,000 Palestinians have been killed in Israeli attacks since October 7, with many more buried under rubble and threatened by illness, according to local news source Aljazeera.

Gold FAQs

Why do people invest in Gold?

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.

Who buys the most Gold?

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.

How is Gold correlated with other assets?

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.

What does the price of Gold depend on?

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.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

AUD/USD remains depressed 0.7000, awaits FOMC Minutes

AUD/USD struggles to capitalize on its recent recovery move and trades with a negative bias below 0.7000 in Wednesday's Asian session. Amid geopolitical uncertainty, the US Dollar attracts some dip-buyers after a fresh leg up in US bond yields, keeping the pair under pressure despite hawkish RBA expectations. All eyes now remain on the FOMC Minutes.

USD/JPY holds firm near 158.50 ahead of Fed Minutes

USD/JPY hangs close to a one-and-a-half-week high near 158.50 in the Asian session on Wednesday, with bulls now awaiting a move beyond the 200-day SMA hurdle before positioning for further gains ahead of the FOMC Minutes. Meanwhile, a fresh leg up in US bond yields revives US Dollar demand amid geopolitical uncertainties, boosting the pair amid dovish BoJ commentary.

Gold retraces gains and nears two-month lows at $4,104

Gold retraces Tuesday’s gains on Wednesday and resumes its broader bearish trend, with the US Dollar appreciating across the board, as investors brace for the release of the minutes of the latest Federal Reserve meeting. The XAU/USD pair trades below $4,120 after retreating from the $4,180 area on Tuesday, drifting closer to the two-month low at $4,104.

Dogecoin extended correction and weakening momentum raise downside risks

Dogecoin extends its losses, trading around $0.090 down more than 5% so far this week. Bearish pressure is strengthening, with short positions reaching a one-month high and traders in overheated conditions. Meanwhile, weakening momentum indicators are also hinting at further losses in DOGE. Derivatives data shows cautious signals among traders.

Indian Rupee hits fresh four-month low, RBI hikes Repo Rate to 5.5%

The Indian Rupee weakens significantly against the US Dollar after a muted response, following the Reserve Bank of India’s monetary policy meeting on Wednesday. The USD/INR pair jumps to near 96.72, the highest level seen in four months. In the policy meeting, the RBI decide to hike its Repo Rate by 25 basis points to 5.5%, the first hike since February 2023.

Eurozone inflation just hit 3.8%, its highest in three years. This chart shows why the ECB can’t simply hike its way out

The ECB would normally have a relatively straightforward answer to inflation running almost twice its target: raise interest rates. But these are not normal circumstances. This time, the bond market is already doing part of the tightening for it, leaving the ECB facing an increasingly difficult dilemma.