GOLD Price Analysis – Aug 03, 2023

Daily Price Outlook

Gold (XAU/USD) price managed to halt its downward trend and exhibited a slight recovery on Thursday. It bounced back from a three-week low around the $1,932 mark. The XAU/USD pair is currently trading in the range of $1,937-$1,938, reflecting a modest increase of about 0.20% for the day. Despite this, gold is still facing challenges in gaining strong traction, as various market dynamics continue to influence its performance.

USD Strength and Gold's Response

The broad-based US Dollar is currently showing strength, maintaining a tight range close to its peak since July 7. This has provided some mild support to the gold price, which is quoted in US Dollars. However, the complexity deepens due to the anticipation that the Federal Reserve (Fed) will uphold higher interest rates for an extended period. This cautious stance has led traders to avoid making significant bullish bets on gold, thus constraining the potential upward movement of the precious metal.

Meanwhile, the recent ADP National Employment report for Wednesday revealed a strong addition of 324,000 jobs to the US economy in July, surpassing the expected 189,000. This surprising job growth underscores the job market's strength and could protect the economy from the threat of a recession.

Consequently, the Federal Reserve (Fed) is likely to maintain its cautious approach. These prospects have kept US Treasury bond yields higher, supporting the US Dollar and implying that gold is more likely to face downward pressure.

Global Factors and Future Outlook

Investors have seemingly absorbed the recent Fitch downgrade of the US government's credit rating, shifting it from AAA to AA+. In addition to this, China's Caixin Services PMI climbed to 54.1 in July from the previous month's 53.9. Thus, this unexpected positive development has helped improve the overall mood for taking risks globally, leading to a small improvement in the predicted future value of US stocks. Hence, this uptick may reduce the appeal of gold as a safe investment choice.

Focus on US Economic Docket and Beyond

Looking forward, market participants are now focusing on the upcoming US economic schedule, which includes key releases like the Weekly Initial Jobless Claims, the ISM Services PMI, and Factory Orders. These data points, coupled with changes in US bond yields, are likely to influence the movements of the USD and provide guidance for the direction of the gold price.

GOLD(XAU/USD) - Technical Analysis

Gold prices made a significant move by breaking through the critical level at $1,945.20 during yesterday's trading session. This sharp reversal has set the stage for further correctional decline, and our analysis suggests that the price is likely to target $1,929.00 and then $1,913.15 as the next key levels.

In the short term, the downward trend appears to be dominant, with the price forming a Double Top pattern, adding more pressure on the downside and potentially pushing the price towards the $1,905.00 mark. However, it is essential to note that if the price manages to breach the resistance at $1,945.20, it could effectively thwart the negative pressure and pave the way for a potential recovery.

For today's trading, we anticipate the price to move within the range of support at $1,915.00 and resistance at $1,945.00. As per our analysis, the expected trend for today remains bearish.