Gold prices (XAU/USD) found some support around $2,410, breaking a three-day losing streak during the early Asian session on Monday. The recovery comes in response to heightened political uncertainty in the United States following the announcement that President Joe Biden will end his reelection campaign.
On Sunday, President Biden disclosed his decision to withdraw from the presidential race, promising to address the nation further later this week. Market experts suggest that Biden’s exit could amplify market volatility. “With uncertainty surrounding the future presidential candidate, investors are likely to seek safe havens until clarity emerges on whether the new candidate will continue Biden’s policies of higher taxes, increased regulation, and greater government intervention,” noted Peter Earle, senior economist at the American Institute for Economic Research.
In addition to the U.S. political developments, concerns in China—home to the world’s second-largest economy—are also impacting gold prices. China’s $715 billion hedge fund sector is facing renewed scrutiny due to stricter regulations set to take effect next month. According to Reuters, the new guidelines, which will be implemented on August 1, impose higher asset thresholds for funds and stricter investing and marketing rules. This regulatory pressure is pushing some investment firms to seek additional funding or consider shutting down, which has contributed to the gold price’s appeal as a safe-haven asset.
Conversely, dovish remarks from Federal Reserve (Fed) policymakers and the increased likelihood of a Fed rate cut in September failed to support gold prices on Friday. The International Monetary Fund (IMF) has advised that the Fed should hold off on rate cuts until late 2024. Investors are now focusing on upcoming U.S. economic data, including the preliminary S&P Global PMI, Q2 GDP figures, and the Personal Consumption Expenditures (PCE) Price Index. Stronger-than-expected economic readings could undermine expectations of a rate cut this year and limit gold’s price gains.
