- Gold prices continued to rise in Asian markets on Wednesday.
- The worsening situation in the Middle East and a dovish stance from the Federal Reserve are supporting gold prices.
- Traders are awaiting speeches from Waller and Bostic on Wednesday.
Gold prices (XAU/USD) rose above $2,500 per troy ounce on Wednesday, buoyed by rising geopolitical tensions in the Middle East. Additionally, Federal Reserve Chairman Jerome Powell's comments at the Jackson Hole Symposium last week that “it's time to start lowering interest rates” were a boon for the precious metal, reducing the opportunity cost of holding a non-interest-earning asset.
Investors will be further focused on speeches by Fed Chairs Christopher Waller and Raphael Bostic on Wednesday for clues on the direction of US interest rates. Attention will then shift to the preliminary second quarter (Q2) US Gross Domestic Product (GDP) and Personal Consumption Expenditures (PCE) price index data, due on Thursday and Friday, respectively. Better than expected results could boost the US Dollar (USD) and limit gains in USD-denominated gold prices.
Daily Digest Market Trends: Gold prices remain firm near record highs
- Thousands of special forces soldiers have been mobilized for a major operation in the northern West Bank that is expected to take several weeks. The report said the army is conducting the largest military operation in the West Bank since 2002 and that the operation is expected to last for several days.
- “The prospect of lower interest rates is also attracting investors. Gold ETF holdings increased by 15 tonnes last week to a six-month high, according to Bloomberg. Speculative interest has been particularly strong: speculative net long positions rose to around 193,000 contracts in the week to 20 August, at the same time gold hit an all-time high and its highest level in almost four-and-a-half years,” said Carsten Fritsch, commodity strategist at Commerzbank.
- The Conference Board's U.S. Consumer Sentiment Index rose to 103.3 in August from an upwardly revised 101.9 in July, the highest level in six months.
- The U.S. home price index fell 0.1% from the previous month in June, below the market consensus of a 0.2% increase, the Federal Housing Finance Agency said on Tuesday.
- Interest rate futures markets are fully pricing in a 25 basis points (bps) cut in September, but the likelihood of further cuts is at 34.5%, according to the CME FedWatch tool. Traders expect the Fed to cut rates by 100 bps this year.
Technical analysis: Gold prices maintain bullish sentiment for the long term
Gold prices are trading modestly higher on the day. The precious metal remains below the upper limit of its five-month ascending channel and its all-time high. The overall positive outlook for gold remains unchanged, with it trading above the crucial 100-day exponential moving average (EMA) on the daily chart. The upward momentum is supported by the 14-day Relative Strength Index (RSI), which is above its mid-line near 64.70, pointing to continued bullish pressure in the near term.
The key resistance level for XAU/USD is at $2,530, which represents the confluence of the all-time high and the upper limit of the trend channel. A bullish breakout above this level could target the psychological barrier at $2,600.
On the downside, the first support level appears to be at the round figure of $2,500, below which further losses could occur near the August 22 low of $2,470.The next contentious level to watch is the August 15 low of $2,432.
today's us dollar price
The table below shows the percentage change of the US Dollar (USD) against the major listed currencies today. The US Dollar was the weakest against the Australian Dollar.
| USD | EUR | GBP | CAD | Australian Dollar | JPY | NZD | Swiss Franc | |
| USD | 0.03% | 0.03% | -0.02% | -0.22% | 0.24% | -0.01% | 0.10% | |
| EUR | -0.02% | 0.00% | -0.04% | -0.24% | 0.24% | -0.03% | 0.09% | |
| GBP | -0.05% | -0.02% | -0.06% | -0.26% | 0.21% | -0.05% | 0.07% | |
| CAD | 0.02% | 0.04% | 0.05% | -0.19% | 0.27% | 0.01% | 0.12% | |
| Australian Dollar | 0.21% | 0.23% | 0.24% | 0.19% | 0.46% | 0.21% | 0.31% | |
| JPY | -0.24% | -0.22% | -0.23% | -0.26% | -0.45% | -0.25% | -9914.98% | |
| NZD | 0.01% | 0.07% | 0.03% | 0.02% | -0.21% | 0.27% | 0.12% | |
| Swiss Franc | -0.11% | -0.09% | -0.08% | -0.12% | -0.32% | 0.14% | -0.12% |
The heat map displays the percentage change between major currencies. The base currency is selected from the left column and the quote currency is selected from the top row. For example, if you select Euro from the left column and move it along the horizontal line to Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Risk Sentiment FAQ
In the world of financial jargon, two terms are widely used: “risk on” and “risk off”, which refer to the level of risk that investors are willing to tolerate during a reference period. In a “risk on” market, investors are optimistic about the future and are more willing to buy riskier assets. In a “risk off” market, investors are worried about the future and start to “play it safe”, buying less risky assets that offer more certain profits, even if they are relatively modest.
Typically during “risk-on” periods, stock markets rise and most commodities other than gold also rise in value as they benefit from a positive growth outlook, currencies of major commodity exporters strengthen due to increased demand and cryptocurrencies rise. In “risk-off” markets, bonds (especially major government bonds) rise, gold shines and safe haven currencies like the Japanese Yen, Swiss Franc and US Dollar all benefit.
Major currencies such as the Australian Dollar (AUD), Canadian Dollar (CAD), New Zealand Dollar (NZD), Ruble (RUB) and South African Rand (ZAR) all tend to rise in “risk-on” markets. This is because their economies rely heavily on commodity exports for growth, and commodity prices tend to rise during risk-on periods. This is because investors expect stronger economic activity to lead to greater demand for raw materials in the future.
The major currencies that tend to rise during “risk-off” periods are the US Dollar (USD), Japanese Yen (JPY), and Swiss Franc (CHF). The US Dollar is the world's reserve currency, and US government bonds are considered safe because investors buy them in times of crisis, making it unlikely that the world's largest economy will default on its debt. The Yen is due to increased demand for Japanese government bonds, which are held at a high rate by domestic investors who are unlikely to sell them even in times of crisis. The Swiss Franc is due to strict Swiss banking laws that provide greater capital protection for investors.
