GOLD Analysis
Afternoon: Gold Prices Fall Below $2,400 Amid Rising US Treasury Yields and Middle Eastern Tensions
Highlights:
- US Treasury yields rise, pushing gold prices below $2,400 for the second day; Middle Eastern tensions curb losses.
- Federal Reserve policymakers signal readiness to cut borrowing costs, potentially supporting gold prices amid geopolitical concerns.
- Traders should monitor key economic data from Germany and the US, and geopolitical developments for further cues on gold's direction.
Overview:
Gold prices have fallen below $2,400 for the second consecutive day as US Treasury yields rose, reflecting an improvement in market sentiment. The yield on the US 10-year benchmark note increased by ten basis points to 3.892%, contributing to the decline in gold prices. Elevated US yields have made the non-yielding metal less attractive to investors. Despite expectations of a 50 basis point interest rate cut by the Federal Reserve at its September meeting, gold prices remain under pressure.
In the broader economic landscape, key US data releases have shown mixed results. The ADP National Employment Report indicated a stronger-than-expected increase in private sector jobs, suggesting resilience in the labor market. However, new applications for unemployment benefits have reached an 11-month high, indicating some underlying weakness. These mixed signals have left traders cautiously optimistic about the Federal Reserve's next moves, with many expecting a dovish tilt that could eventually support gold prices.
Rising geopolitical tensions in the Middle East, specifically Hezbollah's attacks on northern Israel, have provided some support for gold prices. Gold is traditionally viewed as a safe-haven asset during times of geopolitical and economic uncertainty. An escalation in the Middle East crisis could potentially drive demand for gold, helping it recover to $2,400 or higher.
Federal Reserve policymakers, including San Francisco Fed President Mary Daly, have indicated that they are balancing the risks associated with their dual mandate—maintaining maximum employment and stable prices. Daly emphasized that they are prepared to reduce borrowing costs in future meetings if necessary, reflecting a dovish stance that could bolster gold prices in the medium term.
In terms of technical analysis, gold prices appear to be finding support at the $2,360 level, with resistance around $2,415. On the MCX, gold prices are looking to get support at ₹68,500 and resistance at ₹69,400. The current trend suggests that gold may remain under pressure due to high US yields, but geopolitical concerns and potential Fed rate cuts could provide upward momentum.
US Treasury yields rise, pushing gold prices below $2,400 for the second day; Middle Eastern tensions curb losses.
Federal Reserve policymakers signal readiness to cut borrowing costs, potentially supporting gold prices amid geopolitical concerns.
Key Economic Data to Watch:
- German Industrial Production m/m
- German Trade Balance from Euro Zone
- Crude Oil Inventories from US Zone
Action: Buy on drop around $2,380, targeting $2,410, with a stop loss below $2,365.
The combination of rising yields, mixed US economic data, and geopolitical tensions creates a complex environment for gold traders. While the current pressure on gold prices might persist in the short term, the potential for Federal Reserve rate cuts and ongoing Middle Eastern tensions provide significant upside risks. Traders should closely monitor upcoming economic releases and geopolitical developments for further cues on gold's direction.
Support and Resistance Levels:
