Gold (XAU/USD) remained in familiar territory, trading in the $2,330s on Tuesday, amidst a subdued market mood following a mixed session for Asian stocks and a loss of investor appetite for tech stocks on Monday.
GOLD VOLATILITY AS INVESTORS AWAIT FRESH CUES
Gold prices hovered about a third of a percent lower on Tuesday, remaining within a range as investors adopted a cautious stance. Market participants are keenly awaiting new macroeconomic and political developments. A significant focus is on the upcoming US Personal Consumption Expenditures (PCE) Price Index for May, set to be released on Friday, which is the Federal Reserve’s (Fed) preferred inflation gauge.
Speeches from Fed members Lisa Cook and Michelle Bowman on Tuesday are expected to offer insights into the future trajectory of US interest rates, a crucial factor for gold prices since it influences the opportunity cost of holding the non-yielding asset.
On Monday, San Francisco Fed President Mary Daly expressed that the Fed should not cut rates until there is confidence that inflation is moving towards the 2% target. Daly also highlighted the importance of balancing inflation control with labor market stability, suggesting potential rate cuts to support demand and employment if unemployment rises.
According to the CME FedWatch tool, market-based probabilities for an interest rate cut at or before the Fed’s September meeting remain relatively high at 67%, up from around 50% last week. Such a move would be bullish for gold.
GEOPOLITICAL TENSIONS PERSIST
Geopolitical factors continue to influence gold due to its safe-haven appeal. Upcoming elections in France and the United Kingdom could impact the geopolitical landscape, with a potential shift to the far right in France and rising support for the right-wing Reform Party in the UK amid ongoing scandals affecting the Conservative Party.
Tensions in the Middle East remain high after a US-backed proposal to end the conflict in Gaza faltered, with Israeli Prime Minister Benjamin Netanyahu agreeing only to a partial ceasefire. Additionally, fears of an escalated conflict with Lebanon persist, as Israeli residents in the north have been advised not to return home until the end of August due to ongoing clashes with Hezbollah.
In Crimea, Russia accused the US of responsibility for a strike that killed several civilians, including children, and injured many others. Russia’s foreign ministry warned of imminent retaliation, although the US denied direct involvement, attributing the strike to Ukraine’s targeting decisions.
TECHNICAL ANALYSIS: GOLD’S REVERSAL AFTER UPSIDE BREAK
Gold recently broke above a key resistance level, the 50-day Simple Moving Average (SMA), and a trendline connecting the May 7 and June 20 highs. However, the precious metal failed to maintain this upward momentum, peaking at $2,369 on June 21 before reversing sharply. It has since fallen back below the breached trendline.
This reversal technically invalidated the bearish Head-and-Shoulders (H&S) pattern that had been forming on the daily chart. Despite the initial invalidation, the inability of bulls to sustain the upside has left the outlook uncertain, with the potential for a more complex topping pattern to emerge, which could still indicate bearish trends.
GOLD IN PAKISTAN
Gold price in Pakistan decreased on Tuesday, with 24-karat gold being sold at Rs241,500 per tola, down Rs500 per tola. It is worth noting that the price has been kept Rs1,500 below its actual cost today due to a reduction in purchasing power.
