Technical Analysis

GOLD Price Analysis – Aug 31, 2023

By LonghornFX Technical Analysis
Aug 31, 20233 min
Signal 2023 05 25 122622 002

Daily Price Outlook

The price of gold (XAU/USD) has managed to extend its upward trajectory, marking its fourth consecutive day of gains on the day. During the Asian trading session, gold surged above the $1,945 mark, edging closer to the four-week peak achieved the previous day. This resurgence in XAU/USD suggests a potential continuation of its recovery from its recent low, which touched around $1,885 just last week, signaling a rebound.

However, the factor behind gold's bullish performance is the belief that the Federal Reserve will opt for a pause in its monetary policies come September. Hence, this sentiment has put downward pressure on the US Dollar, thereby providing support for gold prices. Moreover, the impending recession risks are further bolstering the appeal of XAU/USD as a safe-haven asset.

Weaker US Dollar Boosts Gold Prices Amid Disappointing Economic Data

The broad-based US dollar is currently hovering near a two-week low due to disappointing economic data from the United States. This weaker dollar is giving a boost to the price of gold. To break it down, the latest numbers from Automatic Data Processing (ADP) show that only 177,000 jobs were added in the US private sector in August. This is a significant drop from the previous month's 324,000 and fell short of the expected 195,000. Additionally, the second estimate reveals that the US economy grew at a 2.1% annualized rate in the second quarter, down from the originally reported 2.4%.

These disappointing figures, combined with a drop in the Consumer Confidence Index from 114.0 to 106.1 in August, are reinforcing the belief in the market that the Federal Reserve (Fed) will pause its interest rate hikes in September. Hence, this expectation is putting downward pressure on US Treasury bond yields, making the USD less attractive and benefiting gold, which doesn't yield interest.

Gold Prices Get Boost Amid Global Economic Concerns and Awaited US Inflation Data

Furthermore, the ongoing concerns about a global economic downturn are giving extra support to the safe-haven precious metal, although a generally positive market sentiment may somewhat limit further gains, at least for now. Traders may also choose to wait on the sidelines before the release of the US PCE Price Index, which is the Federal Reserve's preferred measure of inflation. This report is due during the early North American session. Currently, the markets are still considering the possibility of a 25 basis point increase by the US central bank in 2023.

So, the data will shape expectations regarding the Fed's future interest rate decisions. This, in turn, will affect the demand for the US Dollar and add fresh momentum to the price of gold.

GOLD Price Chart – Source: Tradingview
GOLD Price Chart – Source: Tradingview

GOLD (XAU/USD) - Technical analysis

The gold price has effectively reached our anticipated target at $1,945.20 and is presently positioned around this level. It is making efforts to establish a supportive foundation above this mark, with the aim of utilizing it as a pivot for further upward movement in the short-term and intraday perspectives. It is noteworthy that our subsequent positive milestones initiate at $1,960.00, extending onwards to $1,977.25.

Consequently, our outlook remains inclined towards a bullish trajectory in the near future, influenced by the completion of the earlier observed double bottom pattern. It's important to acknowledge that any failure to surpass the $1,945.20 threshold could interrupt the bullish momentum, potentially leading to a downward correction towards $1,929.00 as the initial target, prior to any potential renewed attempt at an upward surge.



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