GOLD Price Analysis – Aug 25, 2023

Daily Price Outlook

Despite concerns about a potential deeper global economic downturn, the Gold Price (XaAU/USD) failed to extend its four-day winning streak and saw a decline during the Asian session on Friday. The XAU/USD is trading just below the $1,915 mark, marking a decrease of over 0.15% for the day. However, the reason behind this downward movement can be attributed to the Federal Reserve's hawkish outlook. This outlook has led to an increase in US Treasury bond yields and propelled the USD Index (DXY) to its highest level since June 6. Consequently, this has prompted some investors to divert their funds away from Gold.

On the flip side, concerns about severe global economic downturn are still prevalent. This is potentially providing some support to the precious metal, often sought as a safe-haven in times of economic uncertainty. This support may help limit the downside for gold, at least for the time being. Moving on, traders seem cautious to place any strong bid as they eagerly await Federal Reserve (Fed) Chair Jerome Powell's much-anticipated speech at the Jackson Hole Symposium.

Fed's Impact on Gold: Hawkish Stance and Market Dynamics

Investors are closely watching the Federal Reserve for clues about interest rate hikes, which greatly affect the US Dollar's short-term value and, in turn, Gold prices. Despite recent sluggish US business activity, Fed officials have hinted at a potential 25 basis points rate increase this year. Boston Fed President Susan Collins suggests rates could stay steady with more hikes possible, ruling out rate cuts for now. Philadelphia Fed President Patrick Harker emphasizes caution, waiting for inflation to drop before discussing rate cuts. Thus, this more hawkish stance has boosted US Treasury bond yields and the USD, pressuring Gold prices lower.

Gold Prices Supported Amid Global Economic Concerns

Across the ocean, worries about a global economic downturn could actually boost the value of precious metals like gold. This is because when the global economy looks shaky, people tend to invest in safe-haven assets like gold. Recently, there have been concerns about China's economy getting worse, and this is making people worried about a possible recession worldwide. These worries are making investors feel less confident, which is making stock markets less strong. Hence, this was seen as a key factor that helped the gold price to limit its losses.

GOLD (XAU/USD) - Technical analysis

The price of gold is currently experiencing a downward movement, testing the critical support level at $1,913.15. This decline is influenced by the negative reading on the stochastic indicator. It's worth noting that the stochastic indicator is gradually showing signs of positive momentum, which could potentially serve as a catalyst for the resumption of the bullish trend. The immediate targets for this upward movement are set at $1,929.00 and $1,945.20.

As a result, the scenario of a bullish trend remains in play. It's important to highlight that a breach below $1,913.15 would invalidate the anticipated upward movement and potentially lead to further price declines. The expected trading range for the current session is anticipated to be between the support level of $1,900.00 and the resistance level of $1,930.00.