Gold price strengthens amid geopolitical risks, bets cut for 50bps Fed rate cut

• The gold price failed to build on the positive overnight move following upbeat US data.
• Easing US recession fears boost investor confidence and help limit the metal.
• Geopolitical risks and bets on an imminent start to the Fed’s rate-cutting cycle provide support.

The price of gold (XAU/USD) drew some buying dips near the $2,432 area on Thursday and rose more than 1.5% on the day, amid the risk of an escalation of the conflict in the Middle East. However, the precious metal stalled intraday movement near the $2,470 mark following the release of upbeat US macro data that eased fears of a recession in the world’s largest economy and dashed hopes for more aggressive policy easing by the Federal Reserve (Fed). This, in turn, pushed up US Treasury bond yields and provided a nice boost for the US dollar (USD). Apart from this, increased risk in US equity markets helped limit gains for the commodity.

However, gold settled with modest gains on the day, snapping a two-day losing streak, and held steady above the $2,450 level during the Asian session on Friday. Investors still seem convinced that the Fed will begin its rate-cutting cycle in September. This keeps a lid on any significant upside for US and USD bond yields, which in turn continues to act as a tailwind for the unprofitable yellow metal. Traders are now looking to second-tier US macro data – Construction and Housing Permits, along with the preliminary Michigan Consumer Sentiment Index – for short-term opportunities later in the early North American session.

Daily Digest Market Movers: Gold price struggles to attract buyers on mixed fundamental backdrop

• Lingering geopolitical tensions stemming from ongoing conflicts in the Middle East and the protracted Russia-Ukraine war helped gold prices regain some positive traction on Thursday.
• As a new round of Gaza ceasefire talks got underway in Doha, investors remained concerned about how Iran would react to the assassination of Hamas leader Ismail Haniyeh in Tehran last month.
• Russia announced Thursday that it would strengthen border defenses, improve command and control and send additional forces after Ukraine’s biggest attack on its sovereign territory since World War II.
• U.S. macro data on Thursday showed retail sales rose more than expected in July and a still resilient labor market, easing fears of a sharp slowdown in the world’s largest economy.
• The U.S. Census Bureau reported that total U.S. retail sales rose 1 percent in July, with ex-auto sales up 0.4 percent, beating estimates for a 0.3 percent increase, and , respectively, 0.1%.
• Another report from the US Department of Labor (DOL) showed that there were 227,000 initial jobless claims in the week ended August 10, better than the 235,000 expected and 234,000 in the previous week.
• Markets have been quick to react and now have a better chance that the Federal Reserve will cut borrowing costs by just 25 basis points at its upcoming monetary policy meeting in September.
• This, in turn, triggered a further rise in US Treasury yields and helped the US dollar attract some significant buying, which in turn capped the yellow metal’s low-yield advantage.
• XAU/USD remains on track for modest weekly gains as focus shifts to the FOMC minutes ahead of next Tuesday and Fed Chairman Jerome Powell’s appearance at the Jackson Hole Symposium.

Technical Analysis: Gold Price Needs to Break Above $2,470 Barrier for Bulls to Take Control

From a technical perspective, the overnight failure near the $2,470 resistance makes it prudent to wait for a few further buys before positioning for any further gains. With the oscillators on the daily chart remaining in positive territory, the price of gold could aim to break the all-time high around the $2,483-$2,484 area reached in July and conquer the psychological $2,500 mark. Sustained strength beyond the latter will confirm a breakout through a wider one-month trading range and could be seen as a new trigger for bullish traders, setting the stage for another near-term appreciation move.

On the other hand, the horizontal zone of $2,447-2,445 now appears to protect the immediate downside ahead of the $2,430-2,429 zone and the weekly low around the $2,424 region. Some further selling could leave the gold price vulnerable to weaken further below the $2,400 level and test the pivotal 50-day Simple Moving Average (SMA) support currently pinned near the $2,383 region. A convincing break below the latter could expose the 100-day SMA near the $2,363-2,362 area and the late-July swing around the $2,353 area. Failure to defend said levels should pave the way for deeper losses.