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- Gold prices held steady at $2,400 early Tuesday, snapping a four-day losing streak.
- The dollar fell along with U.S. Treasury yields despite a return to risk aversion.
- China's economic concerns could be a headwind for gold prices.
- Daily technicals continue to favor gold buyers, but $2,425 is key.
Gold prices are making another sustained attempt to regain $2,400, replicating the moves seen during Asian trading on Monday. Gold prices appear to be benefiting from typical market caution, renewed worries about the Chinese economy and conditions ahead of key U.S. earnings reports.
Gold prices await new catalysts for clear direction
Despite safe-haven flows, the dollar turned defensive as U.S. Treasury yields fell from two-week highs. Reports that US Vice President Kamala Harris won 1,976 delegates to become the Democratic Party's presumptive nominee in the November presidential election put downward pressure on the dollar.
Notably, Donald Trump's chances of winning the election have narrowed after Joe Biden stepped down to allow Harris to run for the White House. A Democratic presidential election would mean higher taxes and the need to lower borrowing costs, suggesting the Fed will have to keep policy accommodative. This, in turn, is bad for the dollar in the long run.
Investors have become nervous and traders have turned risk-averse as worries about China's economic slowdown have intensified ahead of earnings reports from Tesla and Alphabet this year after the close in New York. In times like these, investors flock to the traditional safe-haven asset gold. However, slowing growth in China, the world's largest consumer of the yellow metal, has raised concerns about physical demand for its gold.
According to Goldman Sachs, “China's gold demand is currently showing cyclical weakness due to the recent price surge, but emerging market central banks including China are likely to continue to purchase gold frequently, whether disclosed or not.”
Traders are also eagerly awaiting Thursday's U.S. second-quarter gross domestic product (GDP) report and June personal consumption expenditures (PCE) inflation data on Friday before making directional bets on gold prices.
Meanwhile, mid-level U.S. housing data, political developments and corporate earnings will drive risk trends, ultimately affecting gold prices in U.S. dollars.
From a broader perspective, gold prices remain supported by expectations of an interest rate cut by the Federal Reserve, with easing policy in September almost a foregone conclusion. Markets are currently pricing in a rate cut in September, as futures indicate a 97% chance of a rate cut, according to CME Group's FedWatch tool.
Gold Price Technical Analysis: Daily Chart
Gold prices will be supported as long as the 14-day relative strength index (RSI) remains above the 50 level. The indicator currently stands at 53.50.
Bullish crosses at the 21-day and 50-day simple moving averages (SMA) are also still in play, proving the constructive outlook for gold prices.
If the gold price rebound gains momentum, it will test the static resistance at $2,425. The next upside barrier lies at the all-time high $2,450, above which buyers will target last week’s all-time high of $2,484.
On the other hand, if sellers return, gold could test the 21-day moving average at $2,379 before falling further to the 50-day moving average support at $2,361.
The last line of defense for gold optimists is the psychological level of $2,350.
Gold FAQ
Gold has played a key role in human history as it has been widely used as a store of value and as a medium of exchange. Currently, aside from its luster and use in jewelry, the precious metal is widely viewed as a safe-haven asset, meaning it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and currency devaluation because it is not tied to any particular issuer or government.
Central banks are the largest holders of gold. To support their currencies during turbulent times, central banks tend to diversify their reserves and buy gold to increase perceptions of the strength of their economies and currencies. High gold reserves can be a source of trust in a country's solvency. According to data from the World Gold Council, central banks increased their gold reserves by 1,136 tons in 2022, worth approximately US$70 billion. This is the highest annual purchase volume on record. Central banks in emerging economies such as China, India and Türkiye are rapidly adding to their gold reserves.
Gold is negatively correlated with the U.S. dollar and U.S. Treasuries, both of which are major reserve and safe-haven assets. Gold tends to rise when the U.S. dollar weakens, allowing investors and central banks to diversify their assets during turbulent times. Gold also has a negative correlation with risk assets. Rising stocks tend to weaken gold prices, while sell-offs in riskier markets tend to benefit the precious metal.
Prices may fluctuate based on a variety of factors. Due to its safe-haven status, geopolitical instability or fears of a severe recession could cause gold prices to rise quickly. As a non-yielding asset, gold tends to rise as interest rates fall, while higher money costs typically weigh on gold. Still, most moves depend on the performance of the U.S. dollar (USD), as assets are priced in U.S. dollars (XAU/USD). A stronger U.S. dollar tends to keep gold prices in check, while a weaker U.S. dollar could push gold prices higher.
- Gold prices held steady at $2,400 early Tuesday, snapping a four-day losing streak.
- The dollar fell along with U.S. Treasury yields despite a return to risk aversion.
- China's economic concerns could be a headwind for gold prices.
- Daily technicals continue to favor gold buyers, but $2,425 is key.
Gold prices are making another sustained attempt to regain $2,400, replicating the moves seen during Asian trading on Monday. Gold prices appear to be benefiting from typical market caution, renewed worries about the Chinese economy and conditions ahead of key U.S. earnings reports.
Gold prices await new catalysts for clear direction
Despite safe-haven flows, the dollar turned defensive as U.S. Treasury yields fell from two-week highs. Reports that US Vice President Kamala Harris won 1,976 delegates to become the Democratic Party's presumptive nominee in the November presidential election put downward pressure on the dollar.
Notably, Donald Trump's chances of winning the election have narrowed after Joe Biden stepped down to allow Harris to run for the White House. A Democratic presidential election would mean higher taxes and the need to lower borrowing costs, suggesting the Fed will have to keep policy accommodative. This, in turn, is bad for the dollar in the long run.
Investors have become nervous and traders have turned risk-averse as worries about China's economic slowdown intensify ahead of earnings reports from Tesla and Alphabet this year after the close in New York. In times like these, investors flock to the traditional safe-haven asset gold. However, slowing growth in China, the world's largest consumer of the yellow metal, has raised concerns about physical demand for its gold.
According to Goldman Sachs, “China's gold demand is currently showing cyclical weakness due to the recent price surge, but emerging market central banks including China are likely to continue to purchase gold frequently, whether disclosed or not.”
Traders are also eagerly awaiting Thursday's U.S. second-quarter gross domestic product (GDP) report and June personal consumption expenditures (PCE) inflation data on Friday before making directional bets on gold prices.
Meanwhile, mid-level U.S. housing data, political developments and corporate earnings will drive risk trends, ultimately affecting gold prices in U.S. dollars.
From a broader perspective, gold prices remain supported by expectations of an interest rate cut by the Federal Reserve, with easing policy in September almost a foregone conclusion. Markets are currently pricing in a rate cut in September, as futures indicate a 97% chance of a rate cut, according to CME Group's FedWatch tool.
Gold Price Technical Analysis: Daily Chart
Gold prices will be supported as long as the 14-day relative strength index (RSI) remains above the 50 level. The indicator currently stands at 53.50.
Bullish crosses at the 21-day and 50-day simple moving averages (SMA) are also still in play, proving the constructive outlook for gold prices.
If the gold price rebound gains momentum, it will test the static resistance at $2,425. The next upside barrier lies at the all-time high $2,450, above which buyers will target last week’s all-time high of $2,484.
On the other hand, if sellers return, gold could test the 21-day moving average at $2,379 before falling further to the 50-day moving average support at $2,361.
The last line of defense for gold optimists is the psychological level of $2,350.
Gold FAQ
Gold has played a key role in human history as it has been widely used as a store of value and as a medium of exchange. Currently, aside from its luster and use in jewelry, the precious metal is widely viewed as a safe-haven asset, meaning it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and currency devaluation because it is not tied to any particular issuer or government.
Central banks are the largest holders of gold. To support their currencies during turbulent times, central banks tend to diversify their reserves and buy gold to raise perceptions of economic and currency strength. High gold reserves can be a source of trust in a country's solvency. According to data from the World Gold Council, central banks increased their gold reserves by 1,136 tons in 2022, worth approximately US$70 billion. This is the highest annual purchase volume on record. Central banks in emerging economies such as China, India and Türkiye are rapidly adding to their gold reserves.
Gold is negatively correlated with the U.S. dollar and U.S. Treasuries, both of which are major reserve and safe-haven assets. Gold tends to rise when the dollar weakens, allowing investors and central banks to diversify their assets during volatile times. Gold also has a negative correlation with risk assets. Rising stocks tend to weaken gold prices, while sell-offs in riskier markets tend to benefit the precious metal.
Prices may fluctuate based on a variety of factors. Due to its safe-haven status, geopolitical instability or fears of a severe recession could cause gold prices to rise quickly. As a non-yielding asset, gold tends to rise as interest rates fall, while higher money costs typically weigh on gold. Still, most moves depend on the performance of the U.S. dollar (USD), as assets are priced in U.S. dollars (XAU/USD). A stronger U.S. dollar tends to keep gold prices in check, while a weaker U.S. dollar could push gold prices higher.
