Gold price has been on a downward spiral for the second consecutive day, reaching a two-week low. While technical selling may be one of the reasons behind this decline, it is expected to remain limited. The looming possibility of a rate cut by the Federal Reserve in September, coupled with a prevailing risk-off sentiment, could provide some support to Gold in the upcoming days.
The non-yielding yellow metal has been facing heavy selling pressure, but it has managed to attract some buyers near the $2,365 mark, helping to offset some of the intraday losses. The belief that the Fed will initiate a series of rate cuts starting in September has kept the US Dollar subdued, benefiting Gold as a safe-haven asset. Additionally, the global equity markets have shown a weaker tone, signaling a risk-off sentiment that further supports the price of Gold.
The global risk sentiment took a hit following the release of disappointing global flash PMIs, raising concerns about an economic slowdown. The Eurozone, in particular, has seen a weakening of economic conditions, with both the manufacturing and service sectors showing signs of a downturn. On the other hand, the US private sector has exhibited healthy growth in business activity, albeit with a slight easing in the manufacturing industry.
Former New York Federal Reserve President William Dudley’s call for a rate cut has reinforced market expectations for a policy-easing cycle, with a 25 basis points interest rate cut anticipated in September. The political uncertainty in the US is also expected to support the price of Gold, especially in light of key macroeconomic data releases such as the Advance Q2 GDP print and the Personal Consumption Expenditures (PCE) Price Index.
From a technical standpoint, the breach below the 100-period Simple Moving Average (SMA) on the 4-hour chart and the $2,385 support level suggest a bearish trend for Gold. Oscillators on the daily chart are indicating negative momentum, favoring further downside movement. Traders are advised to watch for a break below the 61.8% Fibonacci level around $2,370 before expecting deeper losses.
In terms of price movement, a recovery might face resistance near the $2,400 mark, while a sustained breach above this level could push Gold towards $2,423-2,425. Further resistance levels lie at $2,432 and $2,469-2,470, with the potential for a move towards the all-time peak around $2,484. However, a failure to break key resistance levels could lead to a retest of support near $2,350.
The Gold price decline is influenced by a combination of technical selling, market sentiment, and economic indicators. While the risk-off mood and Fed rate cut expectations may provide temporary support, traders should remain cautious and monitor key support and resistance levels for potential market movements.