Gold rebounded near key support at $3,350 as markets bet on a Fed rate cut
2025-08-06 01:07:26
Spot gold prices edged higher during the U.S. trading session on Tuesday (August 5th), reversing an earlier pullback after finding strong support near $3,350. During the European trading session, gold prices briefly dipped due to improved risk appetite and a slight rise in U.S. Treasury yields, failing to extend Monday's rebound. However, buyers stepped in near the 50-day simple moving average (SMA), pushing prices back from the day's low. Gold's rebound was supported by a weakening U.S. dollar, fueled by market confidence in a September Federal Reserve rate cut.
Investors are turning their attention to trade-related news, particularly developments on U.S. tariffs, which could bring new volatility to global markets.
Tuesday's data release was relatively light. The S&P Global Services Purchasing Managers' Index (PMI) for July came in at 55.7, slightly above the expected 55.2. The composite PMI rose to 55.1 from 54.6, indicating continued resilience in private sector activity. However, the Institute for Supply Management (ISM) Services PMI disappointed, falling to 50.1 from the expected 51.5, with declines in both the new orders and employment sub-indices.
The current market as a whole tends to be risk-oriented, which temporarily weakens the safe-haven appeal of gold.
Regional markets rebounded strongly from last week's losses. The MSCI All-Country World Index snapped a six-day losing streak, while the MSCI Asia Pacific Index rose 0.6%. Japan's Nikkei 225 rose 280 points on Tuesday. European stocks also rose for a second consecutive day, with the STOXX 50 and STOXX 600 both rising around 0.4%. Meanwhile, the UK's FTSE 100 approached its all-time high, approaching 9,150 points. On Wall Street, major stock indices rebounded sharply on Monday. The S&P 500 surged 1.5%, snapping a four-day losing streak; the Dow Jones Industrial Average rose 585 points; and the Nasdaq Composite rose 1.9%.
After last week's weak US jobs report, expectations that the Federal Reserve could resume rate cuts as early as September have boosted market optimism. According to the CME FedWatch Tool, the market currently sees a 92% probability of a rate cut at the September meeting. This dovish outlook has curbed gains in US bond yields and the US dollar, providing support for gold prices despite short-term resistance.
Market drivers: U.S. Treasury yields rebounded slightly after hitting a one-month low, while the dollar stabilized
The Institute for Supply Management's services employment index fell from 47.2 to 46.4, indicating continued weakness in services hiring, while the new orders index fell from 51.3 to 50.3. Notably, the prices paid index rose sharply from 67.5 to 69.9, indicating that cost pressures remain high despite the slowdown in economic activity.
U.S. Treasury yields extended Friday's decline on Monday, hitting a one-month low, driven by weak non-farm payrolls (NFP) data and a significant downward revision. The 10-year Treasury yield fell 6 basis points to 4.19%, having previously reached a high of 4.25%, while the 30-year Treasury yield fell 8 basis points to 4.78%, down from 4.86%. Yields rebounded slightly on Tuesday, with the 10-year yield rising 3 basis points to 4.21% from its opening level of 4.18%, and the 30-year yield rising 2 basis points to 4.80% from 4.78%.
The U.S. dollar index (DXY) stabilized on Tuesday after falling from a two-month high of 100.26 on Friday, showing strength against major currencies, hovering around 99.00 but still near a one-week low.
According to ANZ, total gold demand rose to 2,384 tons in the first half of 2025, the strongest first-half performance since 2013. Investment demand was driven significantly by retail and exchange-traded fund (ETF) inflows, offsetting weakness in jewelry consumption. Investment demand exceeded 1,000 tons, with net inflows of 397 tons into gold ETFs, reversing last year's outflows. Retail investment increased by 38 tons to 636 tons.
Despite an 18% year-on-year decline in jewelry demand to 782 tons, macroeconomic headwinds such as slowing global growth, persistently high inflation, geopolitical tensions, and tariff risks have strengthened gold's appeal as a safe-haven asset. While central bank gold purchases slowed to 415 tons in the first half of the year, ANZ Bank predicts that full-year gold purchases will remain strong at 900-950 tons in 2025, continuing to support gold prices.
San Francisco Federal Reserve Bank President Mary Daly slightly challenged market bets on a significant rate cut. In an interview, she acknowledged a cooling labor market but noted it was "not extremely weak" and warned that further weakness would be unwelcome. Daly added that she was willing to wait one more cycle in July but stressed that the Fed "can't wait forever." She also noted that significant uncertainty remains about whether a September rate cut is appropriate but downplayed concerns that tariffs are creating persistent inflationary pressures. Markets interpreted Daly's comments as further evidence that the Fed may be ready to cut rates in September.
In addition to the Institute for Supply Management Services PMI and the S&P Global Composite and Services PMIs, Tuesday will also see the release of the goods and services trade balance and Red Book retail sales data. While these data are not blockbuster figures in themselves, they may provide additional clues about underlying economic momentum, particularly in consumption, services activity, and foreign trade.
Technical analysis: Spot gold holds support near $3,350
(Source of spot gold daily chart: Yihuitong)
Spot gold is struggling to continue last week's rebound momentum, with prices currently hovering around $3,350.
Last week, gold broke out from below an ascending triangle pattern and briefly hit a one-month low before finding support above the 100-day simple moving average (SMA), which shows that bears still lack conviction.
Gold is currently trading slightly above the 50-day SMA, which acts as an immediate support, followed by the 100-day SMA. If the price falls further, the next targets could be around $3,275 and $3,200.
The Relative Strength Index (RSI) on the daily chart is in neutral territory around 55, indicating a lack of clear momentum. Meanwhile, the MACD indicator shows a golden cross with the DIFF crossing the DEA, and the MACD histogram is positive, indicating accumulating bullish momentum. However, the overall reading is low, and further upward momentum is needed. A sustained golden cross and a larger MACD histogram would be bullish.
On the upside, if the bulls can reclaim the bottom of the broken triangle and decisively push above $3,380, a move towards $3,450 is possible and may even revisit the all-time high.
At 01:04 Beijing time, spot gold was quoted at US$3,380.08 per ounce, up 0.20%.
Investors are turning their attention to trade-related news, particularly developments on U.S. tariffs, which could bring new volatility to global markets.
Tuesday's data release was relatively light. The S&P Global Services Purchasing Managers' Index (PMI) for July came in at 55.7, slightly above the expected 55.2. The composite PMI rose to 55.1 from 54.6, indicating continued resilience in private sector activity. However, the Institute for Supply Management (ISM) Services PMI disappointed, falling to 50.1 from the expected 51.5, with declines in both the new orders and employment sub-indices.
The current market as a whole tends to be risk-oriented, which temporarily weakens the safe-haven appeal of gold.
Regional markets rebounded strongly from last week's losses. The MSCI All-Country World Index snapped a six-day losing streak, while the MSCI Asia Pacific Index rose 0.6%. Japan's Nikkei 225 rose 280 points on Tuesday. European stocks also rose for a second consecutive day, with the STOXX 50 and STOXX 600 both rising around 0.4%. Meanwhile, the UK's FTSE 100 approached its all-time high, approaching 9,150 points. On Wall Street, major stock indices rebounded sharply on Monday. The S&P 500 surged 1.5%, snapping a four-day losing streak; the Dow Jones Industrial Average rose 585 points; and the Nasdaq Composite rose 1.9%.
After last week's weak US jobs report, expectations that the Federal Reserve could resume rate cuts as early as September have boosted market optimism. According to the CME FedWatch Tool, the market currently sees a 92% probability of a rate cut at the September meeting. This dovish outlook has curbed gains in US bond yields and the US dollar, providing support for gold prices despite short-term resistance.
Market drivers: U.S. Treasury yields rebounded slightly after hitting a one-month low, while the dollar stabilized
The Institute for Supply Management's services employment index fell from 47.2 to 46.4, indicating continued weakness in services hiring, while the new orders index fell from 51.3 to 50.3. Notably, the prices paid index rose sharply from 67.5 to 69.9, indicating that cost pressures remain high despite the slowdown in economic activity.
U.S. Treasury yields extended Friday's decline on Monday, hitting a one-month low, driven by weak non-farm payrolls (NFP) data and a significant downward revision. The 10-year Treasury yield fell 6 basis points to 4.19%, having previously reached a high of 4.25%, while the 30-year Treasury yield fell 8 basis points to 4.78%, down from 4.86%. Yields rebounded slightly on Tuesday, with the 10-year yield rising 3 basis points to 4.21% from its opening level of 4.18%, and the 30-year yield rising 2 basis points to 4.80% from 4.78%.
The U.S. dollar index (DXY) stabilized on Tuesday after falling from a two-month high of 100.26 on Friday, showing strength against major currencies, hovering around 99.00 but still near a one-week low.
According to ANZ, total gold demand rose to 2,384 tons in the first half of 2025, the strongest first-half performance since 2013. Investment demand was driven significantly by retail and exchange-traded fund (ETF) inflows, offsetting weakness in jewelry consumption. Investment demand exceeded 1,000 tons, with net inflows of 397 tons into gold ETFs, reversing last year's outflows. Retail investment increased by 38 tons to 636 tons.
Despite an 18% year-on-year decline in jewelry demand to 782 tons, macroeconomic headwinds such as slowing global growth, persistently high inflation, geopolitical tensions, and tariff risks have strengthened gold's appeal as a safe-haven asset. While central bank gold purchases slowed to 415 tons in the first half of the year, ANZ Bank predicts that full-year gold purchases will remain strong at 900-950 tons in 2025, continuing to support gold prices.
San Francisco Federal Reserve Bank President Mary Daly slightly challenged market bets on a significant rate cut. In an interview, she acknowledged a cooling labor market but noted it was "not extremely weak" and warned that further weakness would be unwelcome. Daly added that she was willing to wait one more cycle in July but stressed that the Fed "can't wait forever." She also noted that significant uncertainty remains about whether a September rate cut is appropriate but downplayed concerns that tariffs are creating persistent inflationary pressures. Markets interpreted Daly's comments as further evidence that the Fed may be ready to cut rates in September.
In addition to the Institute for Supply Management Services PMI and the S&P Global Composite and Services PMIs, Tuesday will also see the release of the goods and services trade balance and Red Book retail sales data. While these data are not blockbuster figures in themselves, they may provide additional clues about underlying economic momentum, particularly in consumption, services activity, and foreign trade.
Technical analysis: Spot gold holds support near $3,350
(Source of spot gold daily chart: Yihuitong)
Spot gold is struggling to continue last week's rebound momentum, with prices currently hovering around $3,350.
Last week, gold broke out from below an ascending triangle pattern and briefly hit a one-month low before finding support above the 100-day simple moving average (SMA), which shows that bears still lack conviction.
Gold is currently trading slightly above the 50-day SMA, which acts as an immediate support, followed by the 100-day SMA. If the price falls further, the next targets could be around $3,275 and $3,200.
The Relative Strength Index (RSI) on the daily chart is in neutral territory around 55, indicating a lack of clear momentum. Meanwhile, the MACD indicator shows a golden cross with the DIFF crossing the DEA, and the MACD histogram is positive, indicating accumulating bullish momentum. However, the overall reading is low, and further upward momentum is needed. A sustained golden cross and a larger MACD histogram would be bullish.
On the upside, if the bulls can reclaim the bottom of the broken triangle and decisively push above $3,380, a move towards $3,450 is possible and may even revisit the all-time high.
At 01:04 Beijing time, spot gold was quoted at US$3,380.08 per ounce, up 0.20%.
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