Gold price rises as US yields fall, geopolitical tensions escalate

• Gold gains 1% as US Treasury yields retreat ahead of key CPI data, with the 10-year yield falling to 3.902%.
• Ongoing tensions in the Middle East, with no ceasefire in sight, are fueling demand for gold’s safe haven status.
• Traders await critical reports on US inflation and retail sales, with Fed comments signaling cautious optimism about disinflation.

Gold rose more than 1 percent on Monday during the mid-North American session as U.S. Treasury yields retreated ahead of a busy U.S. economic calendar. Traders are gearing up for the latest consumer price index (CPI) report for July, which is expected to show an improvement in the disinflation process. XAU/USD is trading at $2,467 after recovering from a daily low of $2,423.

Sentiment has changed amid ongoing developments in the Middle East. The lack of efforts by Israel, Lebanon and Iran to reach a ceasefire agreement kept market participants on edge. This triggered a flight to Gold’s safe haven status due to a possible escalation of the conflict.

U.S. Treasury yields edged lower, with the benchmark 10-year rate down four basis points (bps) to 3.902 percent, ahead of the release of inflation data.

Meanwhile, Federal Reserve Governor Michele Bowman was neutral, contrary to her usual hawkish stance, and said some progress on inflation was welcome, according to data from the past two months.

Later in the week, the economic file will present US inflation figures on Tuesday and Wednesday, followed by retail sales data from the University of Michigan (UoM) Consumer Sentiment on Thursday and Friday.

Daily market reasons: Gold price rises ahead of US data release

• The July producer price index is expected to fall from 0.2% to 0.1% monthly.
• The Consumer Price Index (CPI) is expected to fall from 3% per year to 2.9%; Core CPI is expected to continue its downward trend from 3.3% to 3.2% YoY.
• Economists expect US retail sales to rise 0% to 0.3% monthly.
• The price of the gold metal gained traction despite reports that China’s central bank refrained from buying gold for the third straight month.
• The CME FedWatch tool puts the odds of a 50 basis point Fed rate cut at the September meeting at 47.5%, down from 52.5% last Friday.

Technical analysis: Gold price has crossed $2,450

Gold’s uptrend extended on Monday, with prices approaching the $2,470 mark ahead of the all-time high (ATH) of $2,483, which could be tested if inflation is lower than forecast. Momentum favors buyers, as reflected in the Relative Strength Index (RSI), which is above the neutral line aiming higher.

The buyer’s first resistance would be the ATH. Once eliminated, the next challenge would be to erase the psychological figure of $2,500. Further gains are seen above this level, the next $2,550, followed by $2,600.

Conversely, if XAU/USD breaks below $2,450, the next support would be $2,400, followed by the 50-day simple moving average (SMA) at $2,373. Once broken, the decline could intensify, leading to the 100-day SMA at $2,352, followed by a trendline support around $2,320.