Gold moves higher on Tuesday, halting its recent corrective plunge from its all-time high.
On Monday, the gold price (XAUUSD) fell for the second day in a row, fueled by optimism over China’s stimulus and Federal Reserve (Fed) Chair Jerome Powell’s more hawkish views. This, in turn, caused some follow-through profit-taking following the recent rally to the all-time high reached last week, however the corrective pullback has stalled near the $2,625-2,624 support level. Nonetheless, the precious metal posted its best quarterly performance. increases since early 2020 and appears prepared to continue its well-established upswing.
Bets on additional Fed rate cuts and geopolitical worries continue to support the XAUUSD.
The worse US economic data, along with a prolonged decline in inflation, should allow the Fed to lower interest rates even further. This, combined with rising geopolitical tensions in the Middle East and the possibility of a larger conflict, should boost the safe-haven gold price. This, together with hopes that China’s stimulus measures will boost physical demand, helps the XAUUSD attract buyers throughout the Asian session on Tuesday and reinforces the near-term favorable outlook ahead of critical US macro data.
Daily Market Movers: Gold prices may continue to draw haven flows amid growing tensions in the Middle East.
China implemented a flurry of stimulus measures last week. For the second consecutive day on Monday, investors’ appetite for risky assets increased, driving some flows away from the typical safe-haven gold price.
Furthermore, Federal Reserve Chair Jerome Powell took a more hawkish stance on the economy, predicting two more 25 basis point interest rate reduction this year as a baseline if the economy performs as predicted.
The markets reacted quickly, lowering expectations for the Fed’s more aggressive policy easing, prompting some follow-through profit-taking in the non-yielding yellow metal and driving to the decline.
Meanwhile, the markets are still pricing in the prospect of an enormous Fed rate decrease by the end of the year, which, along with continuous global tensions, acts providing a tailwind for safe-haven precious metals.
Israeli forces have launched limited, restricted, and targeted ground incursions in Lebanon two days after killing Hezbollah’s leader, Hassan Nasrallah, in an airstrike, threatening to escalate the Middle East conflict.
Traders are now anticipating the publication of major US macroeconomic data for some meaningful momentum.
Last week, Israel rejected a US and French proposal for a 21-day ceasefire on the Lebanon border to enable time for a diplomatic settlement that would allow displaced citizens on both sides to return home.
Traders are now looking to the US economic calendar, which includes the release of the ISM Manufacturing PMI and the JOLTS Jobs Opening, for some momentum ahead of other significant macro data due at the start of a new month.
