Gold price is trading in a slight uptrend above the pivotal support at $2,625-$2,624

• The price of gold rises on Tuesday and blocks its recent corrective slide from the all-time high.
• Bets on further Fed rate cuts and geopolitical risks continue to benefit XAU/USD.
• Traders are now eagerly awaiting the release of key US macro data for a significant boost.

The price of gold (XAU/USD) ended in the red for a second straight day on Monday amid optimism over China’s stimulus and relatively dovish remarks from Federal Reserve (Fed) Chairman Jerome Powell. This in turn prompted further profit-taking after the recent run to the all-time high was touched last week, although the corrective pullback is stalling near the $2,625-$2,624 support area. However, the precious metal posted its best quarterly gains since the start of 2020 and looks poised to extend its well-established uptrend.

Weaker US economic data, along with a continued slowdown in inflation, should allow the Fed to cut interest rates further. This, along with rising geopolitical tensions in the Middle East and the risk of wider conflict, should continue to benefit gold prices. This, along with expectations that China’s stimulus measures will revive physical demand, helps XAU/USD attract some buyers during the Asian session on Tuesday and validates the positive near-term outlook ahead of key US macro data.

Daily Digest Market Movers: Gold Price May Continue to Attract Refuge Flows Amid Rising Middle East Tensions

• A slew of stimulus measures from China last week continued to stoke investor appetite for riskier assets and took some flows away from the traditional gold price for a second straight day on Monday.
• In addition, Federal Reserve Chairman Jerome Powell took a more dovish tone on the economy and said he sees two more 25-basis-point interest rate cuts this year as a benchmark for whether the economy performs as expected.
• Markets reacted quickly and reduced expectations for more aggressive policy easing by the Fed, leading to profit-taking around the unyielding yellow metal and contributing to the slide.
• Meanwhile, markets are still weighing the possibility of an outsized Fed rate cut by the end of this year, which, along with lingering geopolitical tensions, is acting as a tailwind for the safe-haven precious metal.
• Israeli forces began limited, localized and targeted ground raids in Lebanon two days after killing the head of the armed group Hezbollah Hassan Nasrallah in an airstrike, threatening to worsen the crisis in the Middle East.
• Israel last week rejected a proposal by the US and France that called for a 21-day ceasefire on the border with Lebanon to allow time for a diplomatic deal to allow displaced civilians on both sides to return home.
• Traders are now looking to the US economic file – which includes the release of the ISM Manufacturing PMI and JOLTS Jobs Opening – for a boost ahead of other key macro data scheduled for the start of a new month.

Technical Outlook: Gold price is finding support near the ascending resistance point of the trend channel around the $2,625-$2,624 area

From a technical perspective, the appearance of some buys near the $2,625-$2,624 area reaffirms support marked by a short-term uptrend channel resistance breakout point and should act as a pivot point. Some further selling could drag the price of gold to the $2,600 level, which, if decisively broken, could pave the way for significant near-term downside. XAU/USD could then decline to the intermediate support of $2,560 en route to the $2,535-2,530 region.

On the other hand, the horizontal zone of $2,656-2,657 could provide some resistance ahead of the $2,672 zone and the $2,685-2,686 region or the record high reached last week. This is closely followed by the $2,700 level, which, if conquered, will be seen as a new trigger for bullish traders and set the stage for an extension of a multi-month uptrend.