GOLD Price Analysis – Sep 03, 2024
Daily Price Outlook
Gold prices (XAU/USD) continue their decline, trading around the 2490 level. However, this drop is attributed to a stronger US Dollar and rising US Treasury bond.
However, expectations of a potential US Federal Reserve (Fed) rate cut in September could support gold prices, as lower interest rates reduce the opportunity cost of holding non-yielding gold. Furthermore, ongoing geopolitical tensions in the Middle East may drive demand for gold as a safe-haven asset.
Looking ahead, the Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers Index (PMI) is set for release on Tuesday.
The key event this week will be the August US Nonfarm Payrolls (NFP) report, which could influence the Federal Reserve's decision on interest rate cuts and, in turn, affect gold prices in the short term.
Impact of Recent US Economic Data and Federal Reserve Expectations on Gold Prices
On the US front, the broad-based US dollar (USD) strengthened, and US Treasury bond yields rose on Tuesday as the US Bureau of Economic Analysis reported that the headline Personal Consumption Expenditures (PCE) Price Index increased by 2.5% year-over-year in July, matching the previous figure but missing the estimated 2.6%.
In the meantime, the core PCE, excluding food and energy, also rose by 2.6%, consistent with prior data but slightly below the forecast of 2.7%. Moreover, the US Gross Domestic Product (GDP) grew at an annualized rate of 3.0% in Q2, surpassing expectations of 2.8%. Initial Jobless Claims for the week ending August 23 fell to 231,000, slightly below the anticipated 232,000.
On the other hand, markets are currently pricing in a nearly 69% chance of a 25 basis points (bps) rate cut by the Federal Reserve in September, with a 31% probability for a 50 bps reduction.
Moving ahead, the US ISM Manufacturing PMI for August is expected to improve to 47.5 from 46.8 in July, while the Services PMI may decline to 51.1 from 51.4. Job additions for August are forecasted at 163,000, with the Unemployment Rate expected to decrease slightly to 4.2%.
Therefore, the stronger US dollar and higher Treasury yields could pressure gold prices down. However, expectations for a Fed rate cut and weaker PMI data might support gold, as lower rates reduce the opportunity cost of holding non-yielding assets.
GOLD (XAU/USD) - Technical Analysis
Gold is currently trading around $2,503, facing a critical juncture on the 2-hour chart. After breaking down from an ascending triangle pattern, the price has been hovering near the $2,503 level, struggling to reclaim its previous bullish momentum. This breakdown is significant as the ascending triangle was providing support around the $2,507 level, and the recent price action suggests that the bears are gaining control.
On the technical front, the pivot point is situated at $2,507, which is now acting as a critical resistance. Immediate resistance stands at $2,508, followed by stronger resistance levels at $2,514 and $2,517. On the downside, the immediate support is at $2,491, with subsequent support levels at $2,480 and $2,471. The 50 EMA, currently positioned at $2,508, is acting as a ceiling for the price, preventing any meaningful recovery.
The Relative Strength Index (RSI) is currently at 44.41, indicating neutral momentum but with a slight tilt towards oversold conditions. This could imply a potential reversal or consolidation phase if the selling pressure continues to mount. However, the key to watch is whether the price can break back above the 50 EMA at $2,508, which could signal a shift in momentum.
In conclusion, Gold's recent breakdown from the ascending triangle pattern around the $2,507 mark has opened the door for further downside potential. If the price remains below $2,507, the bearish momentum could accelerate, targeting the next support at $2,491 and potentially down to $2,480 or even $2,471.
Conversely, a recovery above $2,508 could challenge resistance levels at $2,514 and $2,517. For traders, an entry point could be considered at a sell position below $2,507, with a take profit target set at $2,492 and a stop loss at $2,517 to manage risk effectively.
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