Article by: ETO Markets

Gold prices held above $2,500, but the market showed some caution. The main factors driving up gold prices include increased expectations of a rate cut by the Federal Reserve and rising geopolitical tensions in the Middle East. Investors' expectations that the Federal Reserve will cut interest rates by 25 basis points in September are largely settled, further driving funds to non-yielding gold. At the same time, the escalation of the situation in the Middle East and the continuation of the war between Russia and Ukraine have intensified risk aversion, further supporting the higher price of gold. However, the optimism of global stock markets and the easing of recession fears in the United States have had some restraining effect on gold's rally. Despite the recent downward trend in US inflation data, improved consumption data and consumer confidence suggest the US economy remains on solid footing, which could slow the pace of more aggressive policy easing by the Federal Reserve. As a result, the market's focus turned to the upcoming release of the Fed's meeting minutes and Jerome Powell's speech at the Jackson Hole Symposium for clues on future monetary policy.

From a technical point of view, gold's break above the psychological level of $… indicates that bulls still dominate the market. Volatility indicators remain in positive territory, indicating further upside potential for gold prices in the short term. However, if a sustained break above the $…- $… peak is not achieved, bulls may need to tread carefully to prevent a pullback. On the downside, the $…- $… area is now a key support level where a pullback in the near term could be supported by buying. If gold breaks below this level, the $…-… area could provide further support. If the downward pressure intensifies, gold has the potential to test the $…-… region where the 50-day simple moving average (SMA) is located, which will become an important threshold for both bulls and bears to fight over.