Daily Digest Market Movers: Gold price draws support from Middle East tensions, dovish Fed expectations

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  • The Israel Defense Forces (IDF) intercepted approximately 30 projectiles that were identified as crossing from Lebanon into northern Israel early Monday morning.
  • The Israeli Air Force and Military Intelligence Directorate have been placed on high alert following observations in Western Iran, suggesting an imminent attack. 
  • Hamas leaders are asking mediators of the cease-fire negotiations with Israel to present a plan based upon previous talks instead of engaging in new ones.
  • The US is strengthening its capabilities in the Middle East by sending an additional guided missile submarine to the region in light of escalating regional tensions.
  • The developments raise the risk of a broader conflict in the region and lend some support to the safe-haven Gold price amid dovish Federal Reserve expectations. 
  • Market participants have fully priced in a 25-basis points Fed rate cut move at the September policy meeting and see an equal chance of a bigger, 50-bps rate cut. 
  • This fails to assist the US Dollar in attracting any meaningful buying and turns out to be another factor acting as a tailwind for the non-yielding yellow metal. 
  • The commodity, however, lacks bullish conviction as investors await the release of the latest US inflation figures this week before placing directional bets. 
  • The US Producer Price Index (PPI) and the US Consumer Price Index (CPI) are due on Tuesday and Wednesday, respectively, followed by the US Retail Sales on Thursday. 
  • This might determine the Fed's future policy decisions, which, along with geopolitical developments, should provide a fresh directional impetus to the XAU/USD.

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