Gold price climbs on geopolitical tensions ahead of Fed’s policy decision

• Gold registers gains of 0.73% as markets anticipate Fed holding rates steady.
• US Dollar Index drops 0.20% to 104.24, undermined by lower Treasury yields.
• Geopolitical risks in the Middle East and safe-haven demand drive bullion prices higher.

Gold price edged higher during the North American session as traders estimate the Federal Reserve (Fed) will hold rates steady, but it would lay the ground for lower rates that were originally set higher due to an inflationary jump after the Covid-19 reopening. The XAU/USD trades at $2,427 and gains 0.73%.

The market mood remains upbeat ahead of the Fed’s decision at around 19:00 GMT. US Treasury bond yields along the belly and the end of the curve fall, undermining the Greenback. The US Dollar Index (DXY), which tracks the buck’s performance against six other currencies, drops 0.20% to 104.24.

Bullion prices witnessed a jump due to rising geopolitical risks following Hezbollah’s weekend attack on Israel, which retaliated this week and killed Hamas leader Ismail Haniyeh in Iran. According to Kyle Rodda, Capital.com market analyst, there has been safe-haven demand for Gold due to Middle East developments.

Meanwhile, the Fed’s two-day meeting ends with the Fed’s decision on interest rates, which is expected to remain unchanged at the 5.25%—5.50% range. Market participants are eyeing hints that the US central bank could begin lowering borrowing costs at the September meeting.

The US economic schedule revealed that private hiring decelerated in July, according to the Automatic Data Procession (ADP) Employment Change report. Aside from this, Building Permits improved following May’s plunge, while the Employment Cost Index (ECI), sought by the Fed as a measure of inflationary pressures in wages, dipped in the second quarter of 2024.

Daily digest market movers: Gold price as data justifies Fed rate cut

• The US ADP Employment Change in July showed that private hiring rose by 122K, below the estimated 150K and missing the 155K created in June.
• The Employment Cost Index (ECI) decelerated from 1.2% to 0.9% QoQ, below the forecast of 1%.
• Pending Home Sales in the US increased by 4.8% MoM in June, exceeding estimates of 1.5% growth following May’s -1.9% decline.
• The CME FedWatch tool shows that the central bank will reduce interest rates by 25 basis points (bps) from their current levels in the September meeting.
• Traders are also eyeing the release of the July ISM Manufacturing Purchasing Managers’ Index (PMI) and Nonfarm Payrolls (NFP), which will be published on Thursday and Friday, respectively.

Technical analysis: Gold price consolidates above $2,400

According to XAU/USD’s daily chart, the uptrend remains intact, though buyers are taking a respite as the non-yielding metal trades sideways at around $2,400. As measured by the Relatives Strength Index (RSI), momentum favors buyers, though economic news and geopolitical risks could move Gold prices.

If XAU/USD climbs past $2,450, the next resistance would be the all-time high at $2,483 ahead of the $2,500 figure. On the other hand, if Gold dips beneath $2,400, key support levels emerge.

The first support would be the July 30 low of $2,376, followed by the 50-day Simple Moving Average (SMA) at $2,359. Further losses lie underneath at the 100-day SMA at $2,331