Despite rising geopolitical tensions and increasing fears of a global economic downturn, gold prices (XAU/USD) have plummeted below the $2,400 mark in Monday’s American session. This sharp decline can be attributed to profit-taking after the recent rally and the negative impact of weaker economic data from major economies.
Factors Impacting Gold Prices:
- Global Economic Slowdown: Concerns about a global economic slowdown have intensified following recent data releases. China’s economy is struggling due to weak demand, the Eurozone is grappling with a downturn in its largest economy, Germany, and the US is also showing signs of a potential recession.
- US ISM Services PMI: While the upbeat US ISM Services PMI for July offered some relief to global markets, it failed to offset the broader negative sentiment.
- Fed Rate Cut Speculations: Market expectations of aggressive rate cuts by the Federal Reserve (Fed) in September have driven down US bond yields and the US Dollar, which typically supports gold prices. However, the recent sell-off suggests that profit-taking might be outweighing this positive factor.
- Geopolitical Tensions: Despite escalating tensions in the Middle East, gold’s safe-haven appeal hasn’t been enough to prevent its decline, as investors focus on economic concerns.
Technical Analysis:
Gold prices are currently oscillating within Friday’s trading range, remaining below the $2,400 level. The 50-day Exponential Moving Average (EMA) near $2,370 is providing support to the bulls. However, the 14-day Relative Strength Index (RSI) suggests indecisiveness among market participants.
A fresh upside could emerge if gold prices break above their all-time high of $2,483.75. On the downside, the upward-sloping trendline at $2,225 remains a major support level in the longer term.
