Gold prices continue to show modest intraday gains on Tuesday, following a sharp drop to a one-week low earlier in the week. XAU/USD bulls are cautious, waiting for the upcoming US inflation data to offer fresh insights into the Fed’s next move and its potential impact on the US Dollar and the precious metal.
📉 Gold Price Action and Market Sentiment
Despite gold managing a slight recovery from Monday’s sharp decline, it remains under pressure as traders adopt a wait-and-see approach ahead of key U.S. economic data releases. The growing consensus that the Federal Reserve is poised to resume its rate-cutting cycle in September failed to boost the U.S. Dollar, which had made slight gains in the past two days.
As of Tuesday’s Asian session, gold was holding steady, but its ability to build on momentum remains uncertain ahead of the US CPI release. The data will provide crucial cues on the Fed’s interest rate policy, which will directly affect USD demand and, consequently, the direction of gold.
📊 Geopolitical Factors Add to Gold’s Uncertainty
While the recent US-China trade truce extension and hopes for a US-Russia summit aimed at ending the war in Ukraine have eased geopolitical tensions, the optimism has somewhat dampened gold’s appeal as a safe-haven asset. Gold’s typical role in times of uncertainty is challenged when investors turn optimistic about easing tensions.
Moreover, U.S. Federal Reserve rate-cut expectations continue to shape the gold market:
- A 90% probability is priced in for a 25-basis point cut in September, following weak U.S. economic data, including the disappointing Nonfarm Payrolls report.
- Further rate cuts are expected later this year, which continue to support demand for non-yielding gold.
🔍 Technical Analysis: Gold Faces Key Levels
- Support Levels:
- The 200-period SMA on the 4-hour chart remains crucial, with $3,344–$3,342 as immediate support.
- A break below this level could drag gold to $3,315, followed by the $3,300 round figure.
- Resistance Levels:
- The $3,358–$3,360 region acts as initial resistance. A move above could see gold testing the $3,380 area, with potential to push toward the $3,400 mark.
- Further bullish momentum could push gold towards $3,422–$3,423, and a decisive break could see prices target the $3,434–$3,435 area, which would set gold up for a test of the all-time high near $3,500.
🧐 Outlook for Gold
With key inflation data coming up this week, gold’s next move will largely depend on CPI figures and their potential impact on Fed expectations. If inflation remains subdued, gold could see further upward momentum. However, any surprise in the data could reverse recent gains and push prices lower.
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