29/08/24

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Gold prices have again risen as the market reacts to disappointing earnings from Nvidia, a significant player in the technology sector. Although Nvidia’s latest earnings report surpassed expectations, it failed to satisfy the market’s high valuation, leading to a shift in overall sentiment. This environment has created a boost in safe-haven investments, including gold, which is currently trading in the $2,510 range, appreciating by about half a percent.

Support for gold’s upward trajectory is further bolstered by recent data indicating a rebound in Chinese demand for the metal. The World Gold Council reported a 17% increase in China’s net gold imports in July, marking the first rise since March. Additionally, net inflows from North American funds have also shown modest growth, suggesting renewed interest in the yellow metal.

A decline in the U.S. Dollar is providing additional momentum for gold. After hitting a peak of 101.18 on Wednesday, the U.S. Dollar Index has rolled back, indicating a weakening dollar which typically correlates negatively with gold prices. Market participants are also focusing on upcoming U.S. Jobless Claims and GDP data, which could offer insights into future Federal Reserve policy on interest rates.

While market expectations already include a rate cut from the Fed in September, discussions continue regarding the potential extent of this cut. Speculation remains about a substantial 0.50% cut, with probabilities hovering around 34.5%. Moreover, market pricing indicates anticipations of a full 1% reduction in rates by year-end, reflecting uncertainty in upcoming Fed meetings.

On Friday, a crucial inflation indicator, the Personal Consumption Expenditures (PCE) Price Index, will be released, further influencing gold prices. Economists predict a rise in core PCE inflation, but this could lead to pressure on gold prices if inflation is higher than expected, as it would imply prolonged high interest rates. A shift away from this anticipated rise could bolster gold prices.

However, there are concerns regarding excessive long positioning in the gold market, which could pose a risk for traders. Analysts suggest that the current market may be overcrowded, increasing the likelihood of downward pressure if circumstances shift unfavorably. As the market consolidates, the potential for a breakout remains but calls for caution as fundamental indicators continue to unfold.