The gold price has been struggling as it continues to lose ground for the second consecutive day, reaching a two-week low. This decline can be attributed to technical selling, which has put pressure on the precious metal. However, the extent of the downward movement is expected to be limited. Additionally, the upcoming September Fed rate cut and the prevailing risk-off sentiment in the market could provide some support to gold in the near term.
The ongoing downtrend in gold prices can be linked to various factors influencing the market sentiment. Firstly, the anticipation of a rate cut by the Federal Reserve in September has weighed on the US Dollar, creating a favorable environment for gold. Moreover, the risk-off sentiment evident in the equity markets has led investors to seek safe-haven assets like gold, further supporting its price.
There is a prevailing sense among traders that the Federal Reserve will initiate a rate-cutting cycle in September, prompting them to adjust their positions accordingly. The focus remains on crucial US macro data releases, particularly the Advance Q2 GDP print and the Personal Consumption Expenditures (PCE) Price Index. These reports will provide further insights into the economic landscape and could influence gold price movement.
The recent release of disappointing global flash PMIs has heightened concerns about an economic slowdown, affecting the global risk sentiment. This development could contribute to a supportive environment for safe-haven assets like gold. The call for a rate cut by former New York Federal Reserve President William Dudley has reinforced market expectations for policy easing, indicating a potential shift in the Fed’s approach.
From a technical standpoint, the downward movement in gold prices is evident in the breakdown below key support levels such as the 100-period Simple Moving Average (SMA) and the 50% retracement level of the June-July rally. Oscillators on the daily chart also suggest a bearish outlook for gold. However, further confirmation is needed to gauge the extent of the downward movement. Resistance levels at $2,400 and $2,412 could pose challenges for any recovery attempts, while support around $2,350 remains a crucial level to watch.
Amidst the fluctuating market conditions, the performance of the US Dollar against major currencies has varied. The strong position of the US Dollar against the Australian Dollar reflects the underlying dynamics in the market. The heat map depicting percentage changes in major currencies against each other provides a visual representation of the currency movements and their impact on the market.
The gold price faces challenges amidst technical selling and a risk-off sentiment in the market. While various factors continue to influence its movement, including Fed rate cut expectations and global economic conditions, traders are advised to tread cautiously and monitor key levels for potential entry or exit points. The upcoming US macro data releases will offer further clarity on the economic landscape and could trigger significant price movements in the gold market.