Gold prices experienced a notable correction after reaching a new all-time high of $3,578 earlier in the week. Despite the pullback, the precious metal remains supported by expectations of future Federal Reserve rate cuts and ongoing concerns about geopolitical tensions.
Key Takeaways:
- Gold Retreats from Record Highs: Gold price retreated during the Asian session on Thursday after reaching its all-time peak at $3,578 earlier in the week, signaling a short-term correction.
- Profit-Taking Dominates: Investors took profits following the strong rally, compounded by a slight rebound in the US Dollar (USD), which typically has an inverse relationship with gold.
- Fed Rate Cut Bets Provide Support: Despite the pullback, the market continues to price in expectations for further rate cuts by the Federal Reserve, which supports gold’s appeal as a non-yielding asset.
- Geopolitical and Trade Uncertainty Bolster Safe-Haven Demand: Rising US trade tariff concerns and global economic uncertainties provide underlying support for gold as a safe-haven asset.
Gold Price Outlook: Modest USD Bounce Disrupts Gold’s Rally
Gold’s rally, which had been driven by a mix of inflation fears, geopolitical instability, and expectations of Fed rate cuts, faces a temporary obstacle in the form of a slight USD recovery. The market is also seeing profit-taking as traders reassess their positions following the impressive rally over the past two weeks. However, the overall sentiment remains positive, with the outlook for gold still largely bullish due to ongoing global economic uncertainties.
The US Dollar has made a modest recovery following the recent gains in gold, but it faces strong headwinds from expectations that the Federal Reserve will continue its dovish stance. Federal Reserve officials have indicated that they are likely to lower interest rates further in the near future, which would decrease the opportunity cost of holding non-yielding assets like gold.
Additionally, geopolitical risks, such as trade tariffs between the US and other global powers, continue to fuel demand for safe-haven assets. A recent court ruling deemed much of the US tariffs illegal, with President Trump planning to appeal, further adding to the uncertainty in the market.
Technical Analysis: Corrective Pullback Likely Before Next Move
From a technical perspective, gold has encountered significant resistance near the $3,578-3,579 zone, where it reached its all-time peak earlier this week. The recent rally now faces a natural consolidation phase as the price moves lower. The Relative Strength Index (RSI) indicates overbought conditions, which suggests that a pullback could be in play before any further upside.
Support Levels to Watch:
- The $3,500 psychological mark remains a key support level. A dip below this threshold could signal further downside toward the $3,440 region, which has previously acted as a resistance point.
- If the $3,440 level holds, the pullback could remain limited, and gold may attempt another rally toward new record highs.
- On the upside, the $3,560 level could offer immediate resistance, followed by the $3,578-3,579 zone, where the all-time high was registered.
Key Focus for Traders:
- US Economic Data: Traders are awaiting the release of the Nonfarm Payrolls (NFP) report on Friday. Strong job data could dampen the expectation for rate cuts and place downward pressure on gold. However, weaker-than-expected numbers could reinforce the case for dovish Fed policy and provide further support to gold prices.
- Fed’s Rate Cut Path: With over 90% probability of a 25 basis point rate cut in September, the expectation for future rate cuts remains one of the key factors keeping gold prices elevated.
Conclusion: Cautious Optimism for Gold’s Future
While gold has experienced a slight correction after hitting record highs, the fundamental and technical setup suggests the potential for further upside. Short-term profit-taking and a modest USD bounce could limit immediate gains, but the broader trend remains bullish, driven by continued Fed dovishness and ongoing geopolitical uncertainties. Traders should watch for consolidation around key support levels before re-entering long positions targeting the next breakout above $3,600.
Stay Updated with Daily Gold Pakistan.