XAU/USD needs support above $2,530 for a new uptrend

• The gold price is back in the red early Tuesday after testing record highs at $2,532 on Monday.
• U.S. dollar and Treasury bond yields halt recovery amid risk-on warm tone.
• The daily technical setup is tilting in favor of gold buyers, with new lifetime highs in sight.

The price of gold has entered a phase of upward consolidation above $2,500 as buyers await fresh catalysts for a new higher leg. Focus now turns to mid-level US housing and sentiment data as tensions in the Middle East appear to ease.

The price of gold bides its time as it waits for a new record high

Gold prices retreated in Asian trade on Tuesday after again facing rejection near the $2,530 level. Fears of a wider conflict in the Middle East appear to have eased, weighing on the traditional gold price, even as the US dollar stalled its overnight recovery, along with US Treasury bond yields.

US Air Force General CQ Brown, the chairman of the Joint Chiefs of Staff, said early Tuesday that fears of a wider conflict in the Middle East in the near term had eased after Israel and Lebanon’s Hezbollah exchanged fire without further escalation.

The comments came after Israel launched a pre-emptive airstrike on Hezbollah in southern Lebanon on Sunday as it said Hezbollah would launch a large-scale rocket and missile attack in northern and central Israel, targeting the Mossad, the agency of Israeli espionage.

Meanwhile, traders are shorting the US dollar, triggered by a strong headline print US durable goods orders for July rose 9.9% versus an expected 4.0% increase. Upbeat US data tempered expectations that the US Federal Reserve (Fed) could cut interest rates by 50 basis points (bps) in September, helping the US dollar bounce back from annual lows.

Markets are currently pricing in a 28% probability of a 50bps rate cut in September, while the odds of a 25bps cut rise to 72%, CME Group’s FedWatch tool showed on Tuesday.

The next gold price direction appears to the north as it remains supported by increased Fed rate cut bets and geopolitical risks in the Middle East. Additionally, the hope of improved physical gold demand from India and China is likely to keep any downside in the gold price limited.

Sachin Jain, CEO of India operations of the World Gold Council (WGC) said “the main beneficiaries of the reduction in customs duties will be the retail consumers”. Demand in the upcoming festival season will be very strong, Jain told Reuters on the sidelines of the India Gold Conference.

“Gold demand in China is expected to improve in the coming months as consumers adjust to higher prices, industry officials said, with economic uncertainty and concerns over currency weakness driving investment flows,” according to Reuters.

Looking ahead, gold traders will take cues from upcoming US CB consumer confidence and housing data, while Fed policymakers’ speeches will also be scrutinized for new policy cues.

Gold Price Technical Analysis: Daily Chart

The short-term technical outlook for the gold price remains more or less the same, with upside risks intact as long as buyers defend the triangular resistance turned support at $2,468.

The 21-day simple moving average (SMA) is approaching this level, making it a strong support.

It is worth noting that the price of gold is consolidating its top break from a symmetrical triangle confirmed a few weeks ago.

Meanwhile, the 14-day Relative Strength Index (RSI) is falling but holding comfortably above 50, currently near 61, justifying the bullish outlook.

Gold buyers need to recover the record level of $2,532 to face the next key barrier at the $2,550 level.

Acceptance above the latter could challenge the round level of $2,600 en route to the triangle target measured at $2,660.

On the other hand, the initial demand area is seen at the $2,500 threshold for gold buyers, below which Friday’s low of $2,485 will be challenged.

A sustained breach of the latter could expose downside to the aforementioned triangle resistance turned support at $2,468.