Gold price (XAU/USD) experiences a slight decline during the North American session, settling around $2,438 after reaching a daily high of $2,462. This dip is attributed to a stronger US Dollar, fueled by heightened recession fears in the wake of a disappointing ISM report.
Market Sentiment:
The financial markets reacted negatively to the Institute for Supply Management (ISM) report, which revealed a significant contraction in manufacturing activity in July. This has sparked concerns about a potential “hard landing” for the US economy, driving investors towards safe-haven assets like the US Dollar and gold.
US Economic Data:
The US Bureau of Labor Statistics (BLS) also reported an increase in initial jobless claims, further reinforcing concerns about the labor market’s weakness. While this data suggests a potential need for interest rate cuts, Fed officials remain cautious and data-dependent in their approach.
Geopolitical Tensions:
Ongoing tensions in the Middle East following recent attacks and retaliations between Israel and Hezbollah have further contributed to the demand for safe-haven assets like gold.
Market Expectations:
Market participants are closely watching Friday’s Nonfarm Payrolls report for July, which will be crucial in shaping expectations for the Fed’s future monetary policy decisions. Current market sentiment suggests a potential 80 basis points of easing towards the end of 2024.
Technical Analysis:
Gold’s uptrend remains intact, but buyers are encountering resistance around weekly highs, potentially leading to a pullback. A drop below $2,400 could trigger further declines towards the July 30 low of $2,376 and the 50-day and 100-day SMAs.
On the upside, a break above $2,450 and the daily top at $2,462 could open the door for a challenge of the all-time high at $2,483, followed by the psychological $2,500 mark.
