Gold price loses ground despite rising Fed rate cut bets, geopolitical risks

• Gold price attracts some sellers in Tuesday’s early Asian session.
• Rising bets of a US rate cut this year and escalating geopolitical conflicts might cap the Gold’s downside. 
• Investors will watch the US CB’s Consumer Confidence and Housing Price Index data, which are due on Tuesday. 

The Gold price (XAU/USD) trades in negative territory amid the modest recovery of the US Dollar (USD) on Tuesday. Nonetheless, the signal from US Federal Reserve (Fed) Chair Jerome Powell at Jackson Hole to start cutting interest rates is likely to support the precious metal. Lower interest rates are generally positive for gold as they reduce the opportunity cost of holding non-interest-paying assets. Furthermore, the rising geopolitical tensions in the Middle East might further boost Gold, a traditional safe-haven asset. 

The People’s Bank of China (PBOC) halted gold purchases in July, marking the third straight month it did not acquire for reserves. Traders will watch the August data for fresh impetus. The concerns about the sluggish economy and the demand for precious metals in China could drag the price of gold down as China is the largest producer and consumer of gold worldwide. 

The US Conference Board’s Consumer Confidence for August and Housing Price Index for June are due on Tuesday. Later this week, the preliminary US Gross Domestic Product (GDP) Annualized for the second quarter and Personal Consumption Expenditures (PCE) – Price Index data will be in the spotlight. 

Daily Digest Market Movers: Gold price loses traction, potential downside seems limited

• Hamas rejects fresh Israeli conditions in ceasefire talks in Egypt and insists that Israel be bound by the terms of a proposal laid out by US President Joe Biden and the UN Security Council, per local news agency Aljazeera. 
• Federal Reserve (Fed) Bank of San Francisco President Mary Daly said that it’s appropriate for the Fed to begin cutting interest rates, adding that she doesn’t want to keep making policy tighter as inflation comes down. 
• Richmond Fed President Thomas Barkin noted that he will take a ‘test and learn’ approach to rate cuts. 
• Fed Chair Powell said on Friday at the Kansas City Fed’s annual economic symposium in Jackson Hole, “The time has come for policy to adjust.”  Powell further stated that he was confident inflation was on its way towards the Fed’s 2% target.
• The US Durable Goods Orders jumped to 9.9% MoM in July from a -6.9% contraction in June, stronger than the 4% increase expected. This figure registered the most significant gain since May 2020.
• According to the CME FedWatch Tool, the markets have fully priced in a 25 basis points (bps) rate cut, while the possibility of a deeper rate cut stands at 30%, down from 36.5% last Friday.

Technical Analysis: Gold price’s broader bullish picture remains intact

Gold price edges lower on the day. The yellow metal remains capped under a five-month-old ascending channel upper boundary. Nonetheless, a broader bullish outlook prevails as the precious metal is well-supported above the key 100-day Exponential Moving Average (EMA) on the daily chart. The 14-day Relative Strength Index (RSI) holds above the midline near 92.95, indicating sustained strength.

If Gold busts through the resistance areas and sustainably sees bullish candlesticks above the $2,530-$2,540 zone, the record high and the upper boundary of the trend channel, XAU/USD could make a play for the $2,600 psychological barrier. 

On the other hand, any follow-through selling below the low of August 22 at $2,470 could draw in more technical sellers and take the Gold down to the next support zone at $2,432, the low of August 15. The key contention level to watch is the $2,360-$2,370 zone, the lower limit of the trend channel and the 100-day EMA.