On Tuesday (August 6th), spot gold fell by 0.6%, closing at $2,389.37 per ounce. The decline in gold prices on Tuesday was due to the rebound of the US dollar and the increase in bond yields. However, the expectation of a rate cut by the US in September and the escalating geopolitical tension in the Middle East restricted the decline in gold, and gold still maintained a range-bound adjustment trend.

On Tuesday, the US dollar rose by 0.2%, and the USD/JPY also stopped falling for the first time this month with a certain degree of rebound. In addition, the 10-year US indicator yield also increased slightly, with the yield of the 10-year US Treasury bond rising from 3.78% on Monday night to 3.89%. This prompted gold to continue to fluctuate at high levels for profit-taking adjustment. The next move for gold to go higher depends on whether the Fed will have an emergency rate cut in September or before September. Although Fed Chairman Powell reiterated at last week's press conference that recent slowdown in hiring and rising unemployment are “normalization” of the labor market. However, investors seem to be somewhat unconvinced. The soft employment report in July has intensified concerns about an economic recession, which means that the Fed may reduce interest rates from a strong position to control inflation rather than damaging the labor market. The market is beginning to worry that the Fed's pursuit of economic soft landing will likely fall short. Once the scenario of the Fed's unexpected and large interest rate cut action to prevent the economy from falling into recession occurs, it will inevitably further push down the US dollar, and then gold is expected to continue to be favored and rise. Even if the Fed gradually and slightly lowers interest rates, it is expected to have little pressure on gold.

Source: E-huitong

On the technical side, the trend of gold prices shows some key support and resistance levels. Currently, the price of gold is strongly supported near the 50-day moving average, which is currently near $2365-2364 per ounce. This level is crucial for short-term traders, as it may be a turning point for the price of gold in the short term. If the price of gold can remain stable above this support line, a rebound may be seen in the short term. However, if the price of gold falls below this area, the downward trend may continue and may further probe the $2342 per ounce area, or the 100-day moving average. On the upside, the $2430 per ounce level may provide short-term resistance. If the price of gold can break through this resistance, the next obstacle is in the $2448-2450 per ounce level. If the price of gold continues to rise and breaks through the $2468-2469 per ounce region, it may challenge the historical high set in July (near the $2483-2484 per ounce area). The next important psychological key level for gold is $2500 per ounce, which, if broken, will lay the foundation for further upward movement.

Wang Gang, Bank of China Guangdong Branch

For personal views only, not representative of the views of the organization.