Geopolitical Tensions Support Gold, But Prices Dip as Market Awaits Fed

Gold prices eased to around $2,420 per ounce on Friday after a nearly 2% increase in the previous session. The metal continues to benefit from ongoing geopolitical tensions and expectations of a Federal Reserve rate cut. Its safe-haven appeal has been strengthened by escalating conflicts, including anticipated retaliatory actions by Iran against Israel and a rare Ukrainian strike on Russia. While expectations for a Fed rate cut in September remain, investors have moderated their predictions. The market is now split on whether the US central bank will opt for a 50 basis point reduction or a more modest 25 basis points. This shift follows a significant drop in initial weekly jobless claims in the US, easing fears that a weakening labor market might signal a recession, and coincides with positive sentiment from a strong ISM services PMI for July. Overall, gold is poised to decline for the week, reversing the substantial gains made in the prior week.

In gold, first support level is at 2,410. If this level is breached, the next supports to watch will be 2,390 and 2,375. On the upside, the initial resistance is at 2,430; if this level is surpassed, the next targets will be 2,450 and 2,500.