Gold fell for the second day in a row, reaching a two-week low.
The gold price (XAUUSD) extends the previous day’s strong retracement decline from the weekly peak on Thursday, remaining under significant selling pressure for the second day in a row. Despite the lack of an evident fundamental cause, the commodity fell to a two-week low of roughly $2,370 during the Asian session.However, a mix of variables should help prevent any additional losses for the precious metal.
The decline could be linked to some technical selling, but it is likely to be modest.
The risk-off impetus, as evidenced by the overnight drop in US equities and a generally weaker tone throughout Asian markets, may provide some support for the safe-haven gold price. Furthermore, rising consensus that the Federal Reserve (Fed) will begin decreasing interest rates in September has US Dollar bulls on the defensive, below a two-week high reached on Wednesday, and should serve as a tailwind for the commodity.
This, in turn, demands prudence before initiating aggressive bearish bets on the gold market, as traders eagerly anticipate the release of the Advance US Q2 GDP print, which is coming later today, for a new impetus. On Friday, the US Personal Consumption Expenditures (PCE) Price Index will be the primary focus play an important role in shaping the Fed’s policy course and providing new directional impetus to the non-yielding yellow metal.
Daily Market Movers: Gold price bulls remain on the sidelines despite a variety of supporting factors.
On Thursday, the gold price draws some follow-through sellers and falls to a two-week low, but any further depreciation appears elusive in light of the risk-off drive and dovish Federal Reserve predictions.
The global risk sentiment took a knock following the release of generally poor global flash PMIs on Wednesday, which increased worries about an economic slowdown and should lend some support to the safe-haven metal.
The HCOB’s preliminary survey suggested a broad-based deterioration in economic conditions in the Eurozone amid a widening manufacturing crisis. This followed by a slowdown in the service sector.
According to S&P Global, business activity in the US private sector continued to grow at a healthy pace in July, with a pick-up in the services sector offsetting a softening in the manufacturing industry.
Fed rate cut predictions and the risk-off mindset may provide support ahead of US data.
Former New York Federal Reserve President William Dudley on Wednesday advocated for a rate decrease as soon as next week in response to recession fears, reiterating betting on an early start to the policy-easing cycle.
Market players have fully priced in a 25 basis point (bps) interest rate decrease in September, and they expect the US central bank to reduce borrowing costs again during the November and December monetary policy meetings.
Aside from this, US political turmoil should operate as a tailwind for the XAUUSD ahead of important US macro data releases on Thursday, including the Advance Q2 GDP report and the Personal Consumption Expenditures (PCE) Price Index.
