Gold prices struggled to extend their recent rally on Thursday, easing lower during Asian trading hours as a firmer U.S. dollar and improved equity sentiment encouraged profit-taking. Despite the dip, strong expectations of Federal Reserve rate cuts continue to provide an underlying cushion for the yellow metal.
Market Overview
Spot gold (XAU/USD) slipped toward the $3,620 zone after failing to build on Wednesday’s positive momentum. The safe-haven appeal weakened as global equities surged, with Wall Street indices posting fresh records and Japan’s Nikkei 225 hitting new highs. A modest recovery in the U.S. dollar added further pressure, though the downside was limited by persistent bets that the Federal Reserve will cut rates at next week’s FOMC meeting.
Geopolitical risks also remain in play, with escalating Russia-Ukraine tensions, Middle East unrest, and political uncertainty in France and Japan supporting investor demand for safe-haven assets. Traders are now awaiting the U.S. CPI report for confirmation of the Fed’s policy path.
Key Drivers Moving Gold
- Rate Cut Bets: Markets are pricing in at least three Fed rate cuts this year, with a small chance of a 50 bps “jumbo cut” in September.
- Geopolitical Tensions: U.S. tariffs on China and India, escalating Russian drone activity, and NATO airspace breaches continue to underpin gold.
- U.S. Dollar Dynamics: While the dollar has recovered slightly from late July lows, any further upside may remain capped by expectations of aggressive Fed easing.
- Risk-On Sentiment: Global stock rallies are weighing on safe-haven flows, tempering near-term demand for bullion.
Technical Outlook
Gold remains overbought on daily RSI charts, raising the risk of a short-term pullback:
- Support Levels: Initial support is seen at $3,600, followed by $3,580 and $3,560. A decisive break below could expose $3,510.
- Resistance Levels: On the upside, immediate hurdles lie at $3,649 and $3,658, with the all-time high of $3,675 in focus. A sustained break above could open the path toward the $3,700 round figure.
Conclusion
While gold is facing near-term pressure from stronger equities and a modest dollar recovery, Fed rate cut expectations and geopolitical tensions continue to favor buyers on dips. Traders should monitor today’s U.S. CPI report, as any downside surprise could reignite bullish momentum and push gold back toward record highs.
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