Gold prices experienced a slight dip this morning as traders engaged in profit-taking. Despite this early correction, the overall sentiment towards gold remains bullish, with market participants now focusing on crucial economic data from the United States. Specifically, attention is directed towards the upcoming Gross Domestic Product (GDP) figures and signals from the Federal Reserve regarding potential interest rate cuts.
Several factors are currently influencing gold price predictions. Notably, Federal Reserve Chairman Jerome Powell has indicated the possibility of a US interest rate cut, which could bolster the appeal of gold as a safe-haven asset. Additionally, Donald Trump has recently imposed a significant 50% tariff on goods from India, a development that warrants close observation. The political climate has further intensified following Trump’s dismissal of Fed Governor Lisa Cook, which may add pressure on the Federal Reserve to lower borrowing costs.
Federal Reserve Policy and Economic Indicators
During the recent Jackson Hole Symposium, Powell emphasized that a slowdown in the labor market could necessitate a downward adjustment in interest rates. He referenced disappointing figures from the July nonfarm payroll report, which may support this decision. Powell acknowledged that tariffs are impacting the economy, although he suggested their effects may be temporary. Nevertheless, concerns over rising unemployment and potential job losses continue to loom large.
According to the CME FedWatch tool, there is an 87% likelihood of a 25 basis point rate cut during the Fed’s policy meeting next month. Such a move could significantly enhance gold’s bullish momentum.
Trade Tariffs and Economic Pressures
The implementation of a 50% tariff on Indian goods took effect Wednesday, further complicating the trade environment. In addition, the Swiss Post has announced a temporary halt on shipments to the United States due to Trump’s removal of a tariff exemption for packages valued at $800 or less. Starting from August 29, shipments will no longer enjoy this exemption, adding to market uncertainty. This development is expected to bolster gold prices while exerting pressure on the US economy and the US Dollar.
During the early European trading session, the US Dollar showed a marginal rebound, prompting some profit-taking in gold and pushing prices briefly into negative territory. As of now, the US Dollar index is trading 0.12% lower, near 98.00, as investors remain cautious ahead of key economic data releases.
The upcoming US economic indicators are crucial for traders. Key releases include the Gross Domestic Product (GDP) data for Q2, scheduled for today, and the Personal Consumption Expenditure Price Index (PCE), set for release on August 29. These figures will provide insight into the Federal Reserve’s potential policy direction regarding interest rates.
Gold Price Outlook
From a technical standpoint, gold prices are currently trading within an ascending channel on the 1-hour time frame. The consistent formation of higher highs suggests that buyers are in control, creating bullish momentum. At the time of this report, gold is trading near the psychological level of $3,400, having consolidated above the $3,380 level for three consecutive days. This pattern has successfully breached key resistance levels, reinforcing the bullish trend.
Gold has recently broken above $3,386 and $3,393, which are now acting as short-term support levels for XAUUSD. Currently, gold is fluctuating between the $3,393 and $3,401 range. A decisive close above $3,401 could pave the way for further gains, potentially reaching a new high of $3,408, a level not seen since August 8.
On the daily chart, gold displays a robust bullish trend, with the MACD indicating continued upward momentum. Since the start of the year, gold has remained above the 200, 100, and 50-day moving averages. A definitive break above $3,410 could signal a movement towards $3,439, the high reached on July 23. Further gains may target the significant psychological level of $3,500, which was last observed on April 22.
In conclusion, the outlook for gold remains positive, supported by expectations of a dovish Federal Reserve, ongoing geopolitical tensions, and signs of a weakening US economy. For long-term traders, this could represent an opportune time to invest in gold, especially with anticipated interest rate cuts likely to draw liquidity towards safe-haven assets.