Gold (XAU/USD) continues to consolidate in a tight range, with investors closely monitoring key economic data and geopolitical developments. Despite a slight rebound during the Asian session, gold struggles to sustain bullish momentum, especially amid fading expectations for a large Federal Reserve rate cut in September.
Gold Price Struggles for Momentum
Gold prices are experiencing mild buying pressure, bouncing off a two-week low, yet the gains remain subdued. The U.S. Dollar (USD) initially weakened, but optimism surrounding a potential U.S.-Russia peace summit and diminished rate cut expectations have capped any meaningful upward movement in gold. Additionally, the market has been cautious ahead of U.S. President Trump’s meeting with Ukrainian President Zelenskyy to discuss a peace deal with Russia.
While traders expect the Fed to begin cutting rates in September, recent U.S. Producer Price Index (PPI) data showed a stronger-than-expected inflation reading, which weighed on gold’s appeal. Nonetheless, gold remains supported by expectations of monetary easing, particularly as the CME Group’s FedWatch Tool suggests an 85% chance of a rate cut next month.
Key Market Drivers for Gold
The U.S. Dollar Index (DXY) briefly recovered from recent lows but remains under pressure as traders scale back bets on a larger rate cut by the U.S. Federal Reserve. The persistent uncertainty in U.S. fiscal policy and high budget deficits continue to weigh on the USD, benefiting gold as a safe-haven asset.
Meanwhile, developments on the Russia-Ukraine peace talks add a layer of caution in the markets. While hopes for a peace deal could undermine gold’s safe-haven demand, any setbacks in the negotiations could reignite demand for precious metals.
Traders are also awaiting the FOMC Meeting Minutes on Wednesday, followed by Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium. These events could provide clarity on the Fed’s stance on inflation and future rate cuts, guiding the next move for gold prices.
Gold Technical Analysis
Gold continues to consolidate above $3,330, supported by key levels between $3,250 and $3,350. Bullish momentum remains intact as long as gold holds above $3,250, but resistance near $3,350 could limit further gains.
- Upside Target: A sustained move above $3,350 could propel gold towards the $3,400 mark, with further potential towards the $3,408-3,410 area.
- Support Levels: $3,325–$3,323 offers immediate support, followed by $3,310–$3,300. A break below $3,300 would signal further downside towards $3,283-3,282 and the $3,268 region.
Silver Price Outlook
Silver (XAG/USD) remains in a bullish consolidation phase, holding above the $37.87 level. However, it faces headwinds from a strong risk-on market sentiment as investors shift away from safe-haven assets in favor of riskier assets.
- Resistance: Silver faces resistance near $38.74, with a breakout above this level paving the way for $39.53.
- Support: Silver’s immediate support lies at $37.87, with further support at $36.21.
U.S. Dollar and Global Economic Data
The U.S. Dollar remains in a vulnerable position, trading lower as expectations for U.S. rate cuts grow. The PPI report and CPI data will be crucial in shaping the Fed’s next moves, while geopolitical events, like the U.S.-Russia peace talks, will also influence gold’s safe-haven demand.
Conclusion
Gold is in a consolidation phase, but the broader bullish outlook remains intact due to the expectations of rate cuts and the potential for economic uncertainty to drive further safe-haven demand. Traders should monitor key technical levels and upcoming economic releases for signals on gold’s next direction.
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