World gold prices cooled down in the trading session on August 27, when spot prices fell below the 4,600 USD/ounce mark after rising above this threshold in the morning. Investors are turning their attention to the speech of US Federal Reserve (Fed) Chairman Kevin Warsh to assess the US interest rate outlook.
As of 2:16 PM Vietnam time, spot gold prices increased by 0.11%, to 4,599.73 USD/ounce. Meanwhile, December gold futures increased slightly by 0.01%, to 4,653.60 USD/ounce.
The recent rise in gold prices is supported by concerns about the US Treasury and the possibility of a decline in the USD value. The US Treasury Department's move to expand the repurchase of long-term government bonds last week has increased demand for gold as a defensive asset.
According to Mr. Kelvin Wong - senior market analyst at OANDA - the story of the possibility of a decline in the USD value, along with concerns about the US budget deficit, is still a factor supporting gold prices in the medium term.
Gold prices rose more than 5% last week after the US Treasury Department expanded its bond repurchase program. This development increased concerns about the value of the USD and boosted cash flow to the precious metal.
However, the market is currently shifting its attention to US monetary policy. The focus is Fed Chairman Kevin Warsh's speech at the Jackson Hole thematic conference on August 28. This will be one of his first important appearances as Fed head and may provide more signals about interest rate orientation.
According to CME FedWatch, the market currently values the probability of the Fed raising interest rates in September at 36.1%, while the probability of raising interest rates in December is 72.1%.
Data released on August 26 showed that US inflation in July remained high, far exceeding the Fed's target of 2%. This development may cause the US central bank to continue to consider between raising interest rates and maintaining policy.
High interest rates often put pressure on gold prices because the precious metal does not generate income from interest. Conversely, if the Fed sends a softer message, the USD and bond yields may be under pressure, thereby creating more momentum for the precious metal.
According to Mr. Linh Tran - market analyst at XS. com - the 4,700 USD/ounce zone is still an important resistance level in the short term. Gold prices may need to accumulate in the 4,500–4,700 USD/ounce zone before forming new upward momentum.
Besides monetary factors, gold continues to benefit from the need to defend against economic and geopolitical risks. Investment cash flow also shows signs of improvement as gold-backed ETFs added more than 28 tons of gold last week, the strongest increase since January.
Gold prices have also surpassed the 200-day moving average, an important technical indicator often used by investors to assess long-term trends.
In the short term, gold prices are likely to continue to fluctuate in the high zone as investors wait for a message from Fed Chairman Kevin Warsh. If the Fed sends a tough signal, gold may face profit-taking pressure; conversely, a softer stance could help the precious metal move back to the 4,700 USD/ounce zone.
On the precious metals market, spot silver price at 2:16 PM increased by 0.49%, to 68.4515 USD/ounce. Platinum price decreased by 0.20%, to 1,831.60 USD/ounce, while palladium decreased by 0.19%, to 1,324.25 USD/ounce.
