Article by: ETO Markets

Although the precious metals market has generally shown a positive trend recently, the price of gold (XAU/USD) has struggled to attract buyers, fluctuating modestly around the $… level, indicating a lack of buying strength. However, the downside risk for gold remains somewhat limited, mainly because the Federal Reserve (Fed) has maintained its benchmark interest rate within the range of 5.25%-5.50%. In a recent post-meeting press conference, Fed Chair Jerome Powell indicated that the Fed might cut rates in September if inflation remains within expected ranges. Additionally, the ADP employment report showed a slowdown in private sector employment and wage growth, giving the Fed further reason to consider rate cuts this year. These factors have led to significant selling of the U.S. dollar and a drop in the yield on ten-year U.S. government bonds, thereby putting pressure on the dollar. 

Furthermore, ongoing geopolitical risks in the Middle East also support gold, allowing this safe-haven asset to reach a new two-week high on Thursday. Nevertheless, due to the market's inclination towards riskier assets, the upside potential for gold prices may be limited. The market is now looking forward to the release of the U.S. Nonfarm Payrolls report on Friday, which is expected to provide new momentum for the market. 

Gold prices have rebounded from support at the 50-day simple moving average and have broken through the resistance at $… to reach a new two-week high near $…. The Relative Strength Index (RSI) is only at 61, indicating that there is still room for gold to rise. The next resistance is at $…, followed by the psychological level of $…. If decisively breached, this could become a new bullish trigger for traders. Conversely, any further declines could be seen as buying opportunities, with strong support around $…. If this level is breached, gold may test the support near $….