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Gold Prices Climb Amid US Political Uncertainty
Hey there! Have you ever wondered how politics can shake up the financial world? Well, let’s dive into a recent example where the Gold price saw a noticeable uptick thanks to some political drama in the United States. We’ll explore how the withdrawal of President Biden from the re-election race and the nomination of Kamala Harris as the Democratic candidate is causing quite a stir in the markets.
Political Shake-Up and Its Impact on Gold
Biden Steps Down, Harris Steps Up
So, here’s the scoop: President Joe Biden decided not to run for re-election. Instead, he’s thrown his support behind Vice President Kamala Harris to lead the Democratic Party against the Republicans, who are rallying behind Donald Trump. This unexpected shift has created a cloud of uncertainty over the US political landscape. And if there’s one thing the financial markets dislike, it’s uncertainty.
Gold Benefits from Political Uncertainty
In times of political instability, investors often seek safe-haven assets to protect their wealth. Gold, being a classic safe-haven, naturally benefits from such situations. With the news of Biden’s withdrawal and Harris’s nomination, the Gold price edged higher. It seems that investors are looking for a secure place to park their money amid the potential turmoil of the upcoming elections.
The US Dollar and Treasury Yields
US Dollar Takes a Hit
The US Dollar, on the other hand, didn’t fare so well. The US Dollar Index, which measures the dollar’s value against a basket of six major currencies, saw a slight dip. This came after a brief recovery from a four-month low. Higher chances of a Trump victory had initially bolstered the dollar because of his promises to cut corporate taxes and lower interest rates. However, the growing uncertainty around the elections put the brakes on this recovery.
XAUUSD is moving in Ascending channel and market has reached higher low area of the channel
Treasury Yields Decline
Adding to the mix, the yield on 10-year US Treasury bonds fell. When yields on these interest-bearing assets drop, the opportunity cost of holding non-yielding assets like Gold decreases. This makes Gold more attractive to investors. The decline in bond yields, combined with the shaky dollar, provided additional support for the rising Gold prices.
Economic Data to Watch This Week
Key Economic Indicators
This week, everyone’s eyes are on a slew of important US economic data. We’re talking about the preliminary S&P Global Purchasing Managers Index (PMI) for July, the Q2 Gross Domestic Product (GDP), and the Durable Goods Orders and Personal Consumption Expenditure (PCE) Price Index for June.
- S&P Global PMI: The preliminary data is expected to show a slower pace of expansion compared to the previous month. This can influence market sentiment and, subsequently, Gold prices.
- GDP Growth: The GDP is anticipated to grow at an annualized rate of 2.0%, up from 1.4% in the previous release. Strong GDP growth often signals a robust economy, which can impact the Federal Reserve’s monetary policy decisions.
- Core PCE Inflation: This is the Fed’s preferred measure of inflation. On a monthly basis, it’s estimated to have increased by 0.2%, up from 0.1% in the previous month. This data is crucial as it can indicate whether inflation is under control or if further monetary tightening is needed.
XAUUSD is moving in Ascending channel and market has reached higher high area of the channel
Federal Reserve’s Next Moves
Investors are also speculating about the Federal Reserve’s next steps. There’s a growing belief that the Fed might start lowering interest rates as soon as September and could potentially make two rate cuts this year. This expectation is based on recent inflation data, which showed slower-than-expected price increases. In fact, for the first time in over four years, monthly headline inflation actually decreased.
Summary
To wrap things up, the recent political developments in the US have created a wave of uncertainty, boosting Gold prices as investors seek stability. The US Dollar and Treasury yields have dipped in response to this uncertainty, adding more fuel to Gold’s rise. With key economic data on the horizon, market watchers are eagerly awaiting clues on the Federal Reserve’s next moves regarding interest rates.
In such unpredictable times, keeping an eye on political events and economic indicators can provide valuable insights into market trends. So, whether you’re an investor or just someone curious about how politics can impact the economy, staying informed is your best bet. Until next time, keep those financial eyes open and stay savvy!
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