Gold Market Experiences Rare Volatility Amid Economic and Geopolitical Pressures
On Monday, the global stock market turmoil significantly impacted gold prices, resulting in volatility of nearly $95 in a single day, an exceptionally rare occurrence. During the Asian market session, spot gold reached a high of $2,458.78 per ounce before sharply declining to $2,364.19 per ounce in the European session. The gold price then rebounded, closing at $2,409.49 per ounce, reflecting a daily loss of $32.85 or 1.35%.
FXStreet analyst Christian Borjon Valencia attributed the sell-off to weaker-than-expected U.S. economic data, which led to a broad market decline. Gold prices in North America dropped over 1% on Monday but rebounded from a six-day low of $2,364 per ounce. Concerns about a potential U.S. recession were fueled by reports of a sharp decline in manufacturing activity and weaker-than-expected non-farm payrolls, prompting traders to anticipate a 50 basis point interest rate cut by the Federal Reserve in September.
The U.S. dollar index fell by 0.50% to 102.70, while U.S. Treasury yields saw further declines, with the 10-year yield dropping by 1 basis point to 3.783%, though it rebounded from a multi-week low of 3.667%.
The global sell-off was triggered by economic concerns, with U.S. stocks plunging as the Dow dropped more than 1,000 points, the Nasdaq fell by 3.4%, and the S&P 500 recorded its largest one-day drop since 2022. Japan's Nikkei 225 Index also experienced a historic 12% drop. The widespread sell-off affected gold and other metals, such as platinum and palladium, as investors liquidated assets amid growing fears.
Despite its reputation as a safe haven, gold was not immune to Monday's market pressures. David Meger from High Ridge Futures noted that gold, along with other risky assets, faced significant selling pressure. However, analysts remain optimistic about gold's future prospects, citing economic and geopolitical uncertainties, as well as the potential for Federal Reserve interest rate cuts.
Exinity Group's chief market analyst Han Tan suggested that geopolitical tensions and hopes for substantial Fed rate cuts could support gold prices. Increased tensions in the Middle East, including a missile attack on a U.S. base in Iraq, also contributed to gold's partial recovery.
Despite Monday's decline, Christian Borjon Valencia observed that gold prices closed above $2,400 per ounce. Middle East tensions, following the assassination of a Hamas leader, and subsequent regional developments, limited the decline in gold prices. Reports of a U.S. military base in Iraq being attacked by rockets further supported gold prices amid rising geopolitical risks.
Valencia emphasized that if gold prices drop below $2,400 per ounce, the 50-day moving average of $2,365 per ounce could be challenged, with further support at the 100-day moving average of $2,340 per ounce. Conversely, if prices recover to $2,450 per ounce, resistance would be met at the August 2 peak of $2,477 per ounce, with potential targets at all-time highs of $2,483 and $2,500 per ounce.
