Market Analysis

The price of gold is not rising as traders wait for new catalysts

Amos Simanungkalit · 27 Aug 2024145.6K Views

Gold prices (XAU/USD) dipped into negative territory on Tuesday, influenced by a modest recovery in the US Dollar (USD). However, indications from US Federal Reserve (Fed) Chair Jerome Powell at the Jackson Hole symposium suggest potential interest rate cuts ahead, which could provide support for the precious metal. Typically, lower interest rates make non-interest-bearing assets like gold more attractive by reducing their opportunity cost. Additionally, escalating geopolitical tensions in the Middle East may enhance gold's appeal as a traditional safe-haven asset.

In July, the People's Bank of China (PBOC) refrained from purchasing gold for the third consecutive month, drawing attention from traders who await August's data for further insights. Concerns over China's sluggish economic performance and its impact on the demand for precious metals could exert downward pressure on gold prices, considering China's status as the world's largest gold producer and consumer.

Market participants are also focusing on upcoming US economic indicators, including the Conference Board’s Consumer Confidence figures for August and the Housing Price Index for June, both due on Tuesday. Later in the week, preliminary data for the US Gross Domestic Product (GDP) for the second quarter and the Personal Consumption Expenditures (PCE) Price Index will be closely watched.

Technical Analysis: Gold's Overall Bullish Trend Remains Strong

Despite a slight downturn, gold prices maintain a robust overall bullish outlook. The metal continues to face resistance below the upper boundary of a five-month-old ascending channel but finds solid support above the crucial 100-day Exponential Moving Average (EMA) on the daily chart. The 14-day Relative Strength Index (RSI) remains above the midpoint around 55, indicating sustained bullish momentum.

A decisive break above the resistance zone between $1,980 and $2,000, which encompasses recent highs and the upper boundary of the ascending channel, could pave the way for gold to challenge the psychological level of $2,050.

Conversely, a sustained move below the August 22 low of approximately $1,930 may attract additional selling pressure, potentially pushing prices toward the next support area around $1,900, marked by the August 15 low. The critical support to monitor lies between $1,870 and $1,880, aligning with the lower boundary of the ascending channel and the 100-day EMA.