Gold prices surged during Tuesday’s North American trading session, driven by geopolitical tensions following Israel’s attack on Lebanon. The XAU/USD spot price climbed above $2,400, reaching $2,404, a notable increase of over 0.80%.
Despite robust US economic data reinforcing a tight jobs market, market sentiment remains mixed. A decline in US Treasury bond yields and a weaker US dollar have supported gold’s ascent as investors prepare for the Federal Reserve’s monetary policy decision scheduled for Wednesday.
In Europe, Germany, the continent’s largest economy, has entered recessionary territory, with Q2 2024 Gross Domestic Product (GDP) data falling short of expectations. This development may prompt the European Central Bank (ECB) to consider a rate cut in September.
The recent geopolitical upheaval—specifically, Israel’s attack on Beirut’s southern suburbs targeting a Hezbollah commander—has further fueled gold’s rise beyond the $2,400 threshold, according to Reuters.
In the US, while the Federal Reserve is anticipated to maintain current interest rates, a dovish tone in the Fed‘s announcement could signal the beginning of a monetary easing cycle. However, recent US jobs data, including higher-than-expected job openings for June, might prompt the Fed to adopt a more cautious stance. Job openings for June totaled 8.184 million, surpassing the 8 million estimate but slightly below May’s revised figure of 8.23 million. Additionally, the Conference Board’s Consumer Confidence Index for July unexpectedly increased to 100.3, exceeding both the consensus estimate of 99.7 and June’s revised figure of 97.8.
Recent US inflation data shows continued progress towards the 2% target, though June’s Core Personal Consumption Expenditures (PCE) numbers exceeded forecasts, indicating persistently high inflation.
Traders are pricing in 54 basis points of easing by the end of the year, according to the December 2024 fed funds rate futures contract.
Technical Outlook:
Gold’s upward trajectory may continue if prices close above $2,400, potentially challenging the all-time high near $2,483 and reaching toward $2,500. Conversely, if gold falls below $2,400, support may be found at the 50-day Simple Moving Average (SMA) of $2,358. Further declines could test the July 25 low of $2,353, followed by the 100-day Moving Average (DMA) at $2,326, and potentially the $2,300 mark.
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