Gold Maintains Momentum; Market Eyes New Breakout
Gold prices held onto their gains during Monday's European session (August 17). XAU/USD traded around US$4,396 per troy ounce, having touched a high of approximately US$4,416 earlier in the day. Gold continues to build on positive momentum following gains over the past two weeks.
Gold's strength is primarily underpinned by a weakening US dollar, following data showing softer US retail sales and consumer sentiment. The Dollar Index fell to around 99.30, making dollar-denominated gold relatively cheaper for holders of other currencies.
A series of softer US economic data points has also led the market to scale back bets on a Federal Reserve interest rate hike. The probability of a Fed rate hike in September now stands at around 31%, down significantly from approximately 51% a month earlier. Expectations of lower interest rates serve as a positive driver for gold, as they reduce the opportunity cost of holding non-yielding assets.
However, gold's upward movement faces headwinds from the risk of energy-driven inflation. US-Iran tensions and uncertainty surrounding the Strait of Hormuz continue to pose risks to oil supplies. Such conditions could reignite inflation if energy prices surge, potentially prompting the Fed to keep the option of future rate hikes on the table.
In the bond market, the yield on the 10-year US Treasury remains around 4.69%, acting as a factor limiting gold's gains. Investor attention is now shifting to the minutes of the Fed's July meeting, due for release on Wednesday, for clues regarding the future direction of monetary policy following the recent softening of US economic data.
Newsmaker Analysis: The US$4,400 area has once again become a critical level for gold's price action during the European session. If XAU/USD can break through and sustain its position above this area, the potential to test levels between US$4,416 and US$4,450 opens up again. Conversely, a failure to sustain momentum above US$4,400 could see gold consolidate back toward the US$4,370–US$4,350 range before finding its next catalyst. (arl)
Source: Newsmaker.id
