Gold prices (XAU/USD) experienced a decline on Thursday, trading around $2,370, due to a combination of technical selling and marginally positive preliminary US S&P Global Purchasing Managers Index (PMI) data for July. The weaker sentiment in global stock and commodity markets, driven by global growth concerns, also contributed to gold’s downward movement.
Market Drivers:
- US PMI Data: The improvement in the S&P Global Composite PMI for July, coupled with a slight increase in the Services PMI, suggests a resilient US economy, potentially mitigating stagflation fears that typically benefit gold.
- Technical Selling: Gold’s decline is partly attributed to technical selling as it undergoes a predicted downward movement within its trading range.
- Fed Rate Cut Expectations: Despite the recent dip, expectations of multiple Fed rate cuts before year-end remain intact, which could provide support for gold prices in the long run.
- Political Developments: The unwinding of the “Trump trade” and the potential for a less inflationary outlook under a Kamala Harris presidency have contributed to lower US bond yields, positively impacting gold.
- Increased Demand from India: The reduction of India’s gold import tax is expected to boost physical demand from the world’s second-largest gold consumer.
- Geopolitical Factors: Plans by BRICS+ nations to introduce a gold-backed alternative to the US Dollar as the world’s reserve currency could further support gold prices in the long term.
Technical Analysis:
Gold is currently experiencing a down leg within its widening trading range since May. The decline is expected to reach the 100-day Simple Moving Average (SMA) at around $2,320, with potential temporary support at the 50-day SMA.
The bearish crossover in the MACD indicator confirms the ongoing downward movement. A break above the all-time high of $2,483 would signal a potential breakout and continuation of the longer-term uptrend, with the next upside target estimated around $2,555-$2,560.
