Gold rallies ahead of US economic data

Gold prices dipped below the key $2,410 per ounce level on Monday. If gold prices rise, resistance may be encountered near $2,483 per ounce, while if gold prices decline, support may be encountered near $2,384 per ounce. 

Gold prices have been typically directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar continued gaining strength on Tuesday and the index rose above 104.5. US treasury yields remained steady, with the US 10-year bond yielding approximately 4.25%.               

Gold prices are affected by central banks’ interest rates. A restrictive monetary policy hinders economic growth lowering the global economic outlook and putting pressure on gold prices. The US Federal Reserve kept interest rates unchanged at its policy meeting in June, within a target range of 5.25% to 5.50%, as expected. 

Rate cut expectations in September are currently above 90%, boosting gold prices. The uncertainty around Fed rate expectations will likely continue in the coming months causing volatility in gold prices. 

Gold prices have experienced a meteoric rise in the past few months and are trading in overbought territory. Geopolitical tensions raise the appeal of safe-haven assets boosting gold prices. Concerns that the crisis in the Gaza area may spread to neighboring countries are raising demand for safe-haven assets keeping gold prices high. Hopes of a ceasefire deal in Gaza, however, are putting pressure on gold prices. Israeli Prime Minister Benjamin Netanyahu signaled on Tuesday that a cease-fire deal may be reached between Israel and Hamas, that would allow hostages to be freed.

Important economic data coming up this week that may affect gold prices, include Advance quarterly GDP on Thursday and Core PCE Price Index data on Friday. Core PCE Price Index is the Federal Reserve's primary inflation gauge and may affect the Fed’s rate outlook.

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Written by:
Myrsini Giannouli

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