Image Source: Pixabay

• Gold price struggles to capitalize on the previous day’s breakout momentum beyond $2,400.
• Geopolitical risks, modest USD downtick and global economic woes lend support to the metal.
• Traders keenly await the BoJ decision for a short-term impetus ahead of the Fed policy update. 

Gold price (XAU/USD) shot to a multi-day peak around the $2,412-2,413 resistance zone on Tuesday and drew support from various factors. The Israeli attack on the Lebanon capital as retaliation for a rocket strike in the Golan Heights on Saturday raised the risk of a further escalation of geopolitical tensions in the Middle East. Furthermore, the dismal German GDP print dashed hopes for a recovery in the Eurozone's largest economy. This comes on top of persistent worries about a slowdown in China – the world's second-largest economy – and benefitted the safe-haven precious metal.

Apart from this, a modest US Dollar (USD) pullback from a nearly three-week high provided an additional boost to the Gold price. The USD remained depressed during the Asian session on Wednesday amid firming expectations that the Federal Reserve (Fed) will start cutting interest rates in September. The XAU/USD, however, struggles to gain any follow-through traction as traders prefer to wait for the outcome of a two-day Federal Open Market Committee (FOMC) meeting. In the meantime, the Bank of Japan (BoJ) policy decision might provide some impetus to the non-yielding yellow metal.

Daily Digest Market Movers: Gold price bulls turn cautious ahead of the key central bank event risks
 

• Geopolitical risks stemming from the ongoing conflicts in the Middle East, along with worries about an economic slowdown and a modest US Dollar pullback, pushed the Gold price to a multi-day top on Tuesday.
• The Israeli military attacked Lebanon’s capital Beirut and targeted the Hezbollah commander who was responsible for the strike in Golan Heights on Saturday, fueling worries about an all-out war in the region.
• According to the preliminary estimates published by federal statistical office Destatis, the German economy unexpectedly shrank by 0.1% in Q2 as compared to the 0.2% growth in the previous three months.
• The US Job Openings and Labor Turnover Survey (JOLTS) revealed that the number of job openings fell to 8.18M in June from 8.23M in the previous month, though was above market expectation of 8.03 million.
• The Conference Board's Consumer Confidence Index rose slightly to 100.3 in July from the previous month's downwardly revised reading of 97.8 as consumers remain relatively positive about the labor market.
• The USD did get a minor lift in reaction to the upbeat US macro data, though the momentum faded rather quickly amid bets for an imminent start of the Federal Reserve's rate-cutting cycle in September.
• The National Bureau of Statistics (NBS) reported this Wednesday that business activity in China's manufacturing sector contracted for the third straight month in July and the growth in the services sector remained tepid. 
• Investors now look to the highly anticipated Bank of Japan policy decision for short-term impetus, though the focus remains glued to the Fed policy update, which, in turn, will influence the non-yielding yellow metal.

Technical Analysis: Gold price finds acceptance above $2,400, seems poised to appreciate further
 

From a technical perspective, the recent bounce from the vicinity of the $2,350 area, or 50-day Simple Moving Average (SMA) support zone, and the subsequent move beyond the $2,400 mark favors bullish traders. Moreover, oscillators on the daily chart have again started gaining positive traction and support prospects for additional gains. Some follow-through buying beyond the $2,412-2,413 region will reaffirm the positive outlook and lift the Gold price to last week's swing high, around the $2,432 zone. A sustained strength beyond the latter will suggest that the corrective decline from the all-time peak touched earlier this month has run its course and set the stage for additional gains. The XAU/USD might then climb to an intermediate hurdle near the $2,469-2,470 region and aim to challenge the record peak, around the $2,483-2,484 zone.

On the flip side, the $2,400 mark now seems to protect the immediate downside ahead of the $2,383-2,382 region, below which the Gold price could slide back to the 50-day SMA, currently pegged near the $2,359 area. A convincing break through the latter, leading to a subsequent fall below last week's swing low, around the $2,353 area, will be seen as a fresh trigger for bearish traders and make the XAU/USD vulnerable. The downward trajectory could extend further towards testing the next relevant support near the $2,325 area en route to the $2,300 round-figure mark.

More By This Author: