Gold Prices Experience Volatility Amid Economic Concerns and Market Reactions
The New York trading session on August 1st witnessed significant fluctuations in spot gold prices, with a dramatic drop from above $2,460 per ounce to below $2,435 per ounce. Thursday's trading saw heightened volatility, with spot gold reaching an intraday low of $2,430.12 per ounce in the European market. Later, prices climbed sharply to an intraday high of $2,462.29 per ounce in early New York trading, before plunging again to a low of $2,434.72 per ounce. By the close of Thursday, spot gold was essentially unchanged from the previous session, settling at $2,445.84 per ounce.
Analysts attribute the volatility to concerns about a potential recession in the United States, which strengthened the U.S. dollar and led to a sharp decline in U.S. stocks, dragging down gold prices. FXStreet analyst Christian Borjon Valencia noted that the dollar rallied after data showed a contraction in U.S. manufacturing activity and highlighted a weak labor market. The Institute for Supply Management (ISM) reported that manufacturing activity fell to recessionary levels in July, its lowest since December 2023, raising fears of a hard landing for the U.S. economy.
U.S. stocks reacted negatively, with the Dow dropping about 500 points and the Nasdaq falling more than 400 points. The ISM manufacturing index slipped to 46.8 in July, indicating a contraction in industry activity. Initial jobless claims rose by 14,000 to 249,000, further indicating a slowdown in the labor market. The Fed is expected to cut interest rates by 25 basis points in September, with a total of 75 basis points expected by year-end.
Analysts pointed out that tensions in the Middle East, including recent attacks by Hezbollah on Israel and Israel's retaliation, continue to support gold prices despite recent declines. The relationship between U.S. stocks and precious metals suggests that when stocks fall, there may be a corresponding impact on gold prices due to liquidity tightening.
Valencia notes that while the uptrend in gold prices remains intact, buyers face resistance near weekly highs, potentially leading to a pullback. The Relative Strength Index (RSI) indicates fading buying momentum, which could open the door for a correction. If gold prices fall below $2,400 per ounce, a further slide to the July 30 low of $2,376 per ounce is possible. A drop below the 50-day moving average of $2,362 per ounce could lead to a target of the 100-day moving average of $2,334 per ounce. Conversely, if gold prices climb above $2,450 per ounce and challenge Thursday's high of $2,462 per ounce, the next target would be the all-time high of $2,483 per ounce, followed by the psychological barrier of $2,500 per ounce.
As of 08:02 GMT August 1, spot gold was trading at $2,444.15 per ounce.
