Gold News: Softer Dollar and Rate Cut Hopes Propel XAU/USD Higher

Gold Prices Rise as Political Uncertainty Grows

Gold prices edged higher on Monday, supported by a softer dollar and expectations of U.S. interest rate cuts. The precious metal’s appeal strengthened as investors sought a hedge against an uncertain political and market outlook.

At 10:16 GMT, XAU/USD is trading $2405.16, up $4.34 or +0.18%.

Biden’s Withdrawal Impacts Markets

President Joe Biden’s decision to abandon his reelection bid has cleared the way for another Democrat to challenge Donald Trump. This political shift has contributed to a weaker dollar, making gold more attractive to buyers holding other currencies.

Trump’s Economic Policies and Inflation Risks

If elected, Trump’s proposed economic policies could potentially fuel inflation. His plans include corporate tax cuts, interest rate reductions, and stricter trade relations, particularly with China. Analysts warn that these measures, especially the implementation of tariffs, could act as inflationary pressures.

Fed’s Monetary Policy Outlook

Markets are pricing in a 97% chance of a rate cut in September, according to the CME FedWatch Tool. Lower interest rates reduce the opportunity cost of holding non-yielding bullion, further supporting gold prices.

Key Economic Data Ahead

Investors are closely watching this week’s economic releases, particularly Friday’s U.S. personal consumption expenditures (PCE) figure. This data, along with other indicators such as existing home sales and advance second-quarter GDP, will provide insights into the Federal Reserve’s monetary policy path.

Market Forecast

The outlook for gold remains bullish in the short term. Kyle Rodda, a financial market analyst at Capital.com, suggests that conditions are in place for gold to reach another record high before the end of 2024. The combination of potential rate cuts, political uncertainty, and geopolitical tensions, particularly between the U.S. and China, is likely to benefit gold prices in the coming months.

Traders should closely monitor political developments, economic data releases, and Federal Reserve communications for potential impacts on gold prices and related market movements.

Technical Analysis

Gold maintains a strong uptrend, recently peaking at $2483.74 before consolidating near $2403.97. The price is comfortably above both major moving averages, confirming the bullish trend. The 50-day moving average at $2359.86 serves as a key support level, with the 200-day MA at $2163.01 providing long-term support.

Immediate support is at $2385.28; a break below could trigger a short-term pullback. The $2450-2480 range presents near-term resistance. A move above $2483.74 could target $2500. However, if price falls below the 50-day MA, it might signal a deeper correction. The significant gap between current price and the 50-day MA suggests the market may be overbought in the short term.