The price of gold (XAU/USD) faced challenges in gaining traction during Tuesday’s Asian session, despite a slight uptick. It managed to hold above a recent low, maintaining a delicate position in the market.
Several factors contributed to the subdued performance. US President Joe Biden’s decision to withdraw from the 2024 Presidential election has increased speculation about a potential return to office for Donald Trump. This scenario is perceived favorably by markets anticipating a more relaxed regulatory environment. Additionally, unexpected interest rate cuts by the People’s Bank of China on Monday bolstered market sentiment, serving as a counterforce against safe-haven assets like gold.
However, expectations of a dovish stance from the Federal Reserve tempered potential losses for the precious metal, which lacks yield. There is growing consensus among market participants that the US central bank may initiate interest rate cuts as early as September, with expectations of further reductions by year-end. Consequently, US Treasury bond yields have trended lower, pressuring the strength of the US Dollar and providing support to gold prices.
Looking at technical indicators, the gold price encountered support near the $2,385 level, which aligns with the 100-period Simple Moving Average on the 4-hour chart and the 50% retracement level of the recent June-July rally. This level is crucial as a breach could lead to deeper declines towards the $2,366-2,365 range, followed by potential support zones around $2,352-2,350 and $2,334-2,334, with a notable level at $2,300.
On the upside, resistance is anticipated around the $2,417-2,418 range, and further gains could see the price testing levels near $2,437-2,438. A sustained move above this range could signal an end to the corrective decline and potentially restore bullish momentum, aiming towards retesting the all-time high near $2,482, with intermediate resistance near $2,458.
In conclusion, while market dynamics present a mixed picture for gold, investors are advised to monitor further price action for indications of continued downside or a potential bullish resurgence from current levels.
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