Gold (XAU) Daily Forecast: Risk-On Sentiment Pressures Gold—Support at $2,500 in Focus

Market Overview

Gold (XAU/USD) began the week on a bearish note, trading lower around the $2,510 level, briefly hitting an intra-day low of $2,508.78. This decline is largely driven by a combination of factors, including a risk-on market sentiment that dampens the appeal of the yellow metal.

Additionally, sluggish demand in China, the world’s largest producer and consumer of gold, is adding further pressure. However, expectations of Federal Reserve rate cuts and ongoing geopolitical tensions could provide some support, preventing deeper losses.

Fed Rate Cut Expectations and Economic Data Impact on Gold Prices

On the U.S. front, growing anticipation surrounds the possibility of the Federal Reserve lowering interest rates in September. Fed Chair Jerome Powell has hinted that it may be time for policy adjustments, which the market has interpreted as a signal for potential rate cuts. The July FOMC Minutes reveal that most Fed officials are in favor of a rate cut next month, provided there are no unexpected economic disruptions.

Philadelphia Fed President Patrick Harker has also expressed support for two or three rate cuts in 2024, while Chicago Fed President Austan Goolsbee noted that the current monetary policy is highly restrictive, with a shift in focus toward employment goals.

Despite these expectations, gold is under pressure due to a risk-on market sentiment. However, upcoming economic data releases could alter this trend, especially if they point to economic weakness.

Key reports to watch this week include July’s Durable Goods Orders on Monday, the preliminary U.S. GDP for Q2 on Thursday, and the PCE Price Index for July on Friday.

Short-Term Forecast

Gold prices may see continued downward pressure if the $2,516 resistance holds. A break below $2,500 could signal further declines, targeting $2,486 support.

Gold Prices Forecast: Technical Analysis

Gold (XAU/USD) is facing key resistance around the $2,516.55 pivot point. The downward trendline, which has been a major hurdle, remains intact, making it challenging for gold to break higher. The recent formation of a small bullish Indecision candle followed by a Hanging Man pattern just below this trendline suggests that bearish momentum could still prevail.

On the downside, immediate support is found at $2,500.15, closely aligned with the 50-day Exponential Moving Average (EMA) at $2,500.83. If gold holds above this level, there’s potential for a rebound. However, if selling pressure increases, a break below $2,500 could lead to a further drop, with the next support level around $2,486.23.

Conclusion: Gold remains bearish below $2,516, and a break above this level is needed to shift momentum towards a bullish outlook.