**Gold Prices: Bullish Momentum Continues Amid Market Uncertainty**
*By Haresh Menghani | Adapted and Expanded*
Gold prices have demonstrated continued strength recently, maintaining a bullish trajectory sparked by a combination of technical clarity and macroeconomic influences. As of early August 2024, the market sentiment around gold remains positive, largely due to a weakening U.S. dollar, lower bond yields, and increasing geopolitical risks. This article, originally authored by Haresh Menghani for FXStreet, expands on his analysis to provide an in-depth understanding of the drivers behind this upward momentum and offers a comprehensive look at the technical and fundamental outlook for gold.
## Technical Overview: Gold Continues Its Breakout Pattern
Gold (XAU/USD) has sustained a potent upward momentum in recent sessions, forming a solid base above the $2,000 psychological level before accelerating towards the $2,040–$2,050 range. This area has served as near-term resistance but was finally breached amid a surge in safe-haven demand.
Technical readings signal that bullish control is intact, supported by the following indicators:
– Daily Moving Averages: Gold remains comfortably above its 20-day, 50-day, and 100-day moving averages, reinforcing a bullish long-term trend.
– RSI Indicator: The Relative Strength Index is currently in overbought territory above 70, suggesting strong momentum. Though traditionally seen as a warning for a pullback, this also indicates strong buying interest.
– MACD: The Moving Average Convergence Divergence (MACD) histogram remains in positive territory, with the signal line supporting continued upward pressure.
– Trendlines: A clearly defined ascending trendline extending from the lows in early July 2024 adds further technical support, currently sitting near the $2,020 mark.
Key Resistance Levels:
– $2,065: A multi-month high that may cap gains in the short term
– $2,075–$2,080: Technical resistance region observed during previous rallies
– $2,100: Psychological level which, if broken decisively, could spark a fresh bullish breakout
Key Support Levels:
– $2,030: Newly established intraday support
– $2,020: Intersection area of the rising trendline and former breakout zone
– $2,000: Strong psychological and technical support
A sustained move above $2,065 could trigger additional buying, potentially propelling gold toward the $2,100 level and beyond. However, a clean breakdown below $2,020 might suggest a short-term pullback or consolidation phase amid profit-taking.
## Fundamental Drivers of Gold’s Upward Momentum
### 1. Softer U.S. Dollar
One of the primary drivers behind gold’s continued upward movement is the broad weakness in the U.S. dollar. The DXY (Dollar Index), which tracks the greenback against a basket of major currencies, has shown a downward trajectory in response to dovish policy expectations from the Federal Reserve and weaker U.S. economic data.
– Recent U.S. economic indicators, including a downbeat Q2 GDP growth rate and weaker-than-expected job data, have added to concerns that economic momentum is cooling.
– Expectations are rising that the Fed might have reached the end of its tightening cycle, increasing the appeal of gold as a non-yielding safe-haven asset.
– Lower U.S. Treasury yields, particularly in the 10-year note, further pressure the U.S. dollar. With real yields dropping, the opportunity cost of holding gold is diminished.
### 2. Geopolitical Tensions
Gold traditionally responds positively to flare-ups in geopolitical risk. Current instability and brewing conflicts around the globe are enhancing its safe-haven status.
– Ongoing war-related risks in Eastern Europe and tensions in East Asia serve as a backdrop for rising investor caution.
– Heightened trade tensions among global powers, notably the U.S. and China, contribute to demand for hard assets like gold.
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