Gold Price Rises As Safe Haven Demand, Soft Dollar Fundamentals Weigh In

Summary:
• The US dollar stands at a weaker position relative to gold price this week as Fed interest rate decision, geopolitical risks grab headlines.

Gold price returned to the upside on Monday as soft US data and an impending interest rate cut weghed down on the metal. The commodity traded at $3,660 per ounce at the spot market at the time of writing, having gained 0.4% on the daily chart. The US dollar has also lost its upside momentum, with the DXY index ranging near the 107.00 mark in the last three sessions.

What’s influencing gold price?

The Federal Reserve will make its interest rate decision on Wednesday, providing the highlight of the week. However, markets have largely locked in a 25 basis points cut, and a forecast-marching cut wouldn’t disrupt gold prices much.

However, multiple high-impact US macroeconomic data will also be out, and could potentially influence XAUUSD trajectory. Key among these are the US Purchesing Managers Index (PMI) data and Retail Sales Data.

Also, falling US treasury bonds could add impetus to the pair. Benchmark 10-year bonds saw their yields decline by 32 basis points as of this writing. That will favour non-yielding gold price if the trend continues ahead of the Fed decision.

Elsewhere, Israel’s planned expansion in the Golan Heights could trigger a spike in geopolitical tension in the Middle East. Taken by Israel following the 1967 Six-Day War, the region is among the most contested territories in the world. Therefore, Israel’s plans could potentially draw resistant forces from the Arab world and Iran, adding fuel to safe haven gold.

Gold price prediction

Gold price pivots at $2,656. Action above that level will favour the buyers to be in control. Conversely, moving below it will shift the momentum to the downside. With the buyers in control, XAUUSD will likely move higher and encounter the first resistance at $2,665. However, extended control could clear that barrier and take the price higher to test $2,674.

On the downside, initial support for gold price will likely be at $2,646. The upside narrative will be invalid if the price breaks below that level. Meanwhile, the resulting momentum could push the price lower and test $2,637.