- Gold price lacks firm intraday direction on Monday amid a combination of diverging forces.
- A positive risk tone caps gains, though geopolitical risks and Fed rate cut bets lend support.
- Traders also seem reluctant ahead of the key US inflation figures, due for release this week.
Gold price (XAU/USD) struggles to capitalize on its gains registered over the past two days and oscillates in a narrow trading band during the Asian session on Monday. A generally positive tone around the equity markets is seen acting as a headwind for the safe-haven precious metal, though a combination of factors continues to act as a tailwind and helps limit the downside. The ongoing conflicts in the Middle East have raised the risk of a wider war in the region. This should keep a lid on any optimism in the markets, which, along with bets for bigger rate cuts by the Federal Reserve (Fed), should offer support to the non-yielding yellow metal.
Traders also seem reluctant and might prefer to wait on the sidelines ahead of this week’s release of the latest inflation figures from the US before placing aggressive directional bets around the Gold price. The US Producer Price Index (PPI) is due on Tuesday, followed by the US Consumer Price Index (CPI) on Wednesday. Apart from this, the US Retail Sales data on Thursday will influence expectations about the Fed’s policy path, which, in turn, will drive the USD demand and provide some meaningful impetus to the XAU/USD. Apart from this, geopolitical developments will help in determining the near-term trajectory for the commodity.
Daily Digest Market Movers: Gold price traders seem non-committed ahead of the US inflation figures this week
- The Israel Defense Forces (IDF) intercepted approximately 30 projectiles that were identified as crossing from Lebanon into northern Israel early Monday morning.
- The Israeli Air Force and Military Intelligence Directorate have been placed on high alert following observations in Western Iran, suggesting an imminent attack.
- Hamas leaders are asking mediators of the cease-fire negotiations with Israel to present a plan based upon previous talks instead of engaging in new ones.
- The US is strengthening its capabilities in the Middle East by sending an additional guided missile submarine to the region in light of escalating regional tensions.
- The developments raise the risk of a broader conflict in the region and lend some support to the safe-haven Gold price amid dovish Federal Reserve expectations.
- Market participants have fully priced in a 25-basis points Fed rate cut move at the September policy meeting and see an equal chance of a bigger, 50-bps rate cut.
- Fed Governor Michelle Bowman said on Sunday that the central bank may not be ready to cut rates in September amid upside risks for inflation and continued strength in the labor market.
- This, however, fails to assist the US Dollar in attracting any meaningful buying or provide any meaningful impetus to the non-yielding Gold price at the start of a new week.
- Bullish traders, meanwhile, prefer to wait on the sidelines and keenly await the release of the latest US inflation figures this week before positioning for any further gains.
- The US Producer Price Index (PPI) and the US Consumer Price Index (CPI) are due on Tuesday and Wednesday, respectively, followed by the US Retail Sales on Thursday.
- This might determine the Fed’s future policy decisions, which, along with geopolitical developments, should provide a fresh directional impetus to the XAU/USD.
Technical Outlook: Gold price seems poised to appreciate further while above the 50-day SMA pivotal support
From a technical perspective, the recent bounce from the 50-day Simple Moving Average (SMA) support favors bullish traders. Moreover, oscillators on the daily chart are holding in positive territory. That said, the lack of strong follow-through warrants some caution before positioning for any meaningful appreciating move. In the meantime, any subsequent move up is more likely to confront some resistance near the $2,448-2,450 region. Some follow-through buying should pave the way for a move towards challenging the all-time top near the $2,483-2,484 area touched in July. This is followed by the $2,500 psychological mark, which if cleared decisively will set the stage for a further near-term appreciating move.
On the flip side, the $2,412-2,410 horizontal resistance breakpoint now seems to protect the immediate downside ahead of the $2,400 round-figure mark. Any further decline might continue to attract dip-buyers and remain cushioned near the 50-day SMA support, currently pegged near the $2,373-2,372 region. The latter should act as a key pivotal point, below which the Gold price could slide to the late July low, around the $2,353-2,352 area, which now coincides with the 100-day SMA support. A convincing break below will shift the near-term bias in favor of bearish traders and prompt aggressive technical selling.