Gold gains momentum above $4,400 as softer US data dampens Fed hike odds
- Gold price drifts higher to around $4,415 in Tuesday’s early Asian session.
- Latest US economic data reduced expectations that the Fed would raise interest rates next month.
- US-Iran peace prospects dim as Trump rejects peace deal extension.
Gold price (XAU/USD) edges higher to near $4,415 during the early Asian session on Tuesday. The precious metal extends its upside amid fading expectations for further US Federal Reserve (Fed) rate hikes. Traders will closely monitor the developments surrounding the Middle East conflicts.
An unexpected decline in US Nonfarm Payrolls (NFP) in July, together with data released last week showing only modest consumer price inflation, has curbed expectations of a US interest rate increase next month. This, in turn, exerts some selling pressure on the US Dollar (USD) and makes bullion cheaper for most buyers.
Markets are now pricing a 35% chance of a Fed rate hike at the upcoming policy meeting, down from 47% a month earlier, according to the CME FedWatch Tool.
On the other hand, ongoing tensions in the Middle East could reignite oil-driven inflation concerns and weigh on the yellow metal. US President Donald Trump said on Monday that he’s not interested in extending the expiring agreement with Iran and fighting flaring anew in Lebanon, per Bloomberg.
“If oil doesn’t steal the show again, if the situation in the Middle East does not erupt and oil prices spike, then it looks as if the path of least resistance for gold is higher,” said James Steel, chief precious metals analyst at HSBC.
China Retail Sales miss forecasts as July momentum stalls again
ING’s Lynn Song points out that China’s consumer backdrop softened again in July, with headline retail activity losing what little traction it had regained. According to ING, “retail sales failed to build on the small recovery of last month, falling to 0.6% YoY in July, down from 1.0% YoY in June.” The bank stresses that this outcome “fell well short of market expectations (market: 1.5%, ING: 1.7%),” underlining how fragile underlying demand remains. On a cumulative basis, ING notes that “year-to-date, retail sales have grown by just 1.2% YoY,” reinforcing the picture of subdued consumption despite earlier policy efforts to support spending.
Technical Analysis: Gold maintains a constructive outlook in the near term
In the daily chart, XAU/USD retains a bullish near-term bias as spot holds above both the 100-day simple moving average (SMA) and the Bollinger middle band, keeping price comfortably supported within the broader uptrend structure. The Relative Strength Index (14) at 65.37 leans toward overbought territory, suggesting upside momentum remains firm but vulnerable to consolidation after the latest advance.
On the topside, immediate resistance aligns with the upper Bollinger band near $4,485; a sustained break above this zone would open the door to further gains and extend the current bullish phase. On the downside, initial support is seen just under the market at the 100-day SMA around $4,385, ahead of the Bollinger middle band at $4,195, while a deeper pullback toward the lower band near $3,900 would be needed to seriously challenge the prevailing positive outlook.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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