Usman Salis
Gold (XAU/USD) struggles to maintain momentum below $2,421, as strong US labor data and Middle East tensions impact market sentiment. Speculation of a Fed rate cut in September provides potential support.
XAU/USD Price Dips Below $2,421 on Strong US Labor Market Data
Gold (XAU/USD) has seen a decline to around $2,421, with an intra-day low of $2,419.44, largely influenced by stronger-than-expected US labor market data. This report has eased recession fears, reducing the demand for safe-haven assets like gold.
The market’s response to the labor data has sparked a rally in US equities, further limiting the gains for XAU/USD. However, this downward trend might be short-lived, as speculation about a potential Federal Reserve rate cut in September is gaining traction. If the Fed moves towards a dovish stance, it could lower US Treasury bond yields, weaken the US dollar, and support a rebound in XAU/USD.
Investors have largely priced in a 25-basis point rate cut by the Federal Reserve in September, with some speculation even suggesting a 50-basis point cut. These expectations have helped cushion gold prices despite the stronger US labor market data. Additionally, the better-than-expected initial jobless claims of 233,000 have further eased economic concerns, which could bolster the outlook for XAU/USD.
The dovish expectations surrounding the Fed have also contributed to lower US Treasury yields and a weaker US dollar, creating a more favorable environment for gold. As a result, despite recent pressures, XAU/USD may find some support in the near term.
Middle East Tensions Keep XAU/USD Afloat Amid Market Uncertainty
The geopolitical situation in the Middle East continues to play a significant role in the gold market. The recent assassination of Hamas chief Ismail Haniyeh in Tehran has escalated tensions, increasing the risk of retaliatory strikes by Iran on Israel. Israel’s ongoing military actions in Gaza, including strikes on schools and a refugee camp, have led to significant casualties.
While Israel has agreed to enter ceasefire talks on August 15, Hamas has not yet responded. This ongoing conflict is contributing to the demand for safe-haven assets like gold, providing some support for XAU/USD amid a backdrop of market uncertainty.
For XAU/USD to shift momentum to the upside, a sustained break above $2,430 is necessary. However, if prices remain below this level, the bearish trend may continue in the short term.
Usman Salis
