gold prices are experiencing a slight decline as geopolitical tensions in the Middle East ease and positive economic data from the United States emerges. On Tuesday, gold was trading in the low around $2,510, reacting to reduced haven demand following a lull in hostilities between Israel and Hezbollah. Although the situation remains tense with threats from Iran, the lack of escalation has diminished the appeal for gold as a safe haven asset.
The downturn in gold prices is also attributed to a robust report on US Durable Goods Orders, which increased by 9.9% in July, the highest rate since May 2020. This impressive data alleviates some concerns about the state of the US economy and suggests that the Federal Reserve may not need to undertake aggressive interest rate cuts, as previously speculated. A more measured approach to rate adjustments would likely pressure gold prices, given the negative correlation between gold and the US dollar.
The expectations for significant interest rate cuts in September have also softened. The likelihood of a 0.50% cut has dropped below 30%, compared to around 35% following remarks from the Federal Reserve Chairman regarding potential rate adjustments.
Analysts at TD Securities remain optimistic about gold ’s medium-term prospects, projecting it could reach a long-term target of $2,700. However, a correction is a possibility, given current long positions in the market. Increased employment data might trigger profit-taking by investors, which could result in a short-term pullback.
In terms of technical indicators, gold is holding above previous resistance levels, suggesting a continuation of the short-term upward trend. Nonetheless, a drop below key levels would undermine this bullish outlook. Overall, while the current environment shows promise for gold ’s appreciation, careful monitoring of economic indicators and geopolitical developments will remain crucial.
