A combination of various elements supports the Gold price in reversing a slight intraday decrease on Monday. Factors such as geopolitical risks and bets on a rate cut by the Fed provide backing, though a positive risk sentiment may limit the potential for gains. Additionally, traders are exercising caution ahead of this week’s release of crucial US inflation figures.
Gold price (XAU/USD) sees an increase in buying interest near the $2,424 region on Monday and is aiming to build on last week’s rise from the 50-day Simple Moving Average (SMA) support. Investors remain anxious about the prospect of heightened conflict in the Middle East, which is viewed as a significant factor contributing to support for gold. Furthermore, expectations for larger interest rate cuts by the Federal Reserve (Fed) offer extra backing to this non-yielding commodity.
However, there is some skepticism surrounding the intraday rise due to an overall favorable sentiment towards equity markets that undermines demand for safe-haven assets such as gold. In addition, a minor increase in the US Dollar (USD) further serves to limit gains for XAU/USD. Traders also display apprehension and choose to stay on the sidelines leading up to key US inflation data with Producer Price Index (PPI) and Consumer Price Index figures set to be released over Tuesday and Wednesday respectively.
Market Movers: Gold price benefits from geopolitical risks and Fed rate cut bets
The Israel Defense Forces (IDF) intercepted around 30 projectiles coming from Lebanon into northern Israel early Monday morning. There was also high alert termed at Israel’s Air Force and Military Intelligence Directorate following indications in Western Iran pointing towards an imminent attack.
Amidst these developments raising concerns about broader regional conflict, there has been considerable movement involving cease-fire negotiations between Hamas leaders and Israel mediators. Additionally, heightened tensions have prompted US reinforcements being sent into this region with another guided missile submarine making its way over – all indicating substantial support for safe-haven gold amidst dovish Federal Reserve expectations.
Markets have priced in anticipation of a 25-basis point Fed rate cut during September’s policy meeting along with equal chances of a more substantial 50-bps rate cut move.
It has been noted that despite upside risks for inflation voiced by Fed Governor Michelle Bowman over prospects that might prompt keeping rates unchanged at their upcoming meeting will not be enough incentive behind attracting buyers or providing impetus valuable for non-interest bearing metals such as gold during early trading sessions.
Bullish traders seem inclined towards prudence while they wait keenly await latest U.S Inflation data before potentially predicting any further increases.
Moreover U.S producer Price index followed by Retail sales figures later could significantly determine future policy decisions led by extraneous factors like those mentioned above thereby providing clearer directional impetus surrounding XAU/USD.
Technical Outlook: Movement indicated favoring upward potential.
