Gold prices are making a run for weekly highs just above $3,380 during Tuesday’s Asian trading hours. Today, market sentiment is heavily influenced by speculation over the direction of U.S. Federal Reserve monetary policy. Eager eyes look toward the next series of economic data releases too. Gold bulls are salivating at a daily RSI that’s looking bullish. They are still looking for a significant close above the $3,380 resistance to retake the momentum and head towards the key $3,400 resistance line.
With the gold market still climbing to new highs, traders are on the lookout for price action and technical signals. A daily candlestick close above the rising trendline support at $3,380 will be needed to keep bullish sentiment alive. Today’s trading sets the stage for gold to rally for the fourth day in a row. Taken together, this trend is a positive indicator for gold prices to continue strengthening in the near term.
Technical Analysis and Market Sentiment
The 14-day RSI for gold is currently sitting above the midline at around 55, which suggests that bullish momentum is developing. The daily chart shows some very encouraging technical factors working in favor of gold buyers. Solid support is seen in the overlapping 21-day and 50-day Simple Moving Averages (SMAs) just below $3,345. If prices do fall below this threshold, we might even expect them to fall further still. Even that would get us only partway to the dangerously low $3,300 level.
Should gold hold above these crucial support levels, it will likely be a strong indication that its uptrend has more room to run. Monitor these thresholds intently! Traders will most closely watch for any signs from across the pond that U.S. economic data may lead policymakers to alter their course on interest rates. A continued slowdown in the services sector would increase worries about U.S. economic resilience which could push gold prices significantly higher.
“We may do fewer than two cuts. The more likely thing is we need to do more.” – San Francisco Fed President Mary Daly
In this regard, expectations of a rate cut in September provide substantial support to gold prices. Strong labor data and dovish remarks from Fed officials suggest an almost certain shift in monetary policy that benefits gold as a non-yielding asset. Gold traders will be watching trade headlines intently. They will watch for comments from Federal Reserve officials for potential new trading catalysts that might move the market to alter course.
The Influence of Economic Data
As the market anticipates critical economic indicators, particularly the ISM Services PMI, gold’s movements remain closely tied to investor sentiment regarding interest rates. An unexpected negative economic report could push investors toward gold as a haven asset. Good data might be enough of an excuse for traders to book profits. The $3,440 resistance level is now the key static level that gold needs to break above in order to continue any bullish run.
The tug of war between economic data and Federal Reserve policy will be a focal point of markets discussions in the days ahead. Analysts suggest that any signs of economic weakness could strengthen gold’s appeal as investors seek refuge from potential volatility in other markets.
“The job market is not precariously weak, but it is softening, and further softening would be unwelcome.” – San Francisco Fed President Mary Daly
This new release highlights the careful balance policymakers will need to continue walking as they weigh an improving employment picture against ongoing inflationary concerns. If labor markets do begin to soften, that would increase the chance of a more aggressive monetary easing, which should make gold even more attractive to investors.
Future Outlook for Gold Prices
Over the next several weeks, all eyes will be on technical setups as several key indicators start to converge. Bull Cross between 21-day/50-day SMAs may be burgeoning. In short, keep an eagle eye on these moving averages to see them cross on a daily closing basis. Such a development almost always foreshadows a more persistent and longer lasting march upwards in prices.
In doing so, gold buyers could be stuck in a tough position with any price drops below important support levels. The ultimate line of defense for gold now is the 100-day SMA at $3,279. A sustained retreat beneath this key threshold could change trader sentiment and likely force market participants to reevaluate their positions.