GOLD Price Analysis – Sep 04, 2024

Daily Price Outlook

Despite negative risk sentiment following weak US manufacturing data, Gold (XAU/USD) failed to halt its losing streak and remained under pressure around the 2,487 level, hitting an intra-day low of 2,472.

This decline can be attributed to the heavy long positions held by Commodity Trading Advisors (CTA) and institutional investors. With many large players already holding substantial amounts of gold, there is limited room for further price increases.

On the geopolitical front, there are no new major events driving up gold demand. Although Russia’s recent missile and drone attack on Ukraine, which resulted in 50 fatalities, is significant, such attacks have been frequent, and this ongoing situation hasn't provided a new impetus for gold.

Gold Prices Remain Unchanged Despite Rising Rate Cut Expectations

On the US front, gold isn’t benefiting from the growing expectation that the Federal Reserve might cut interest rates by 0.50% at its meeting on September 18. Before a recent weak report on US manufacturing, there was a 31% chance predicted for this big cut. Now, the probability has jumped to 41%. Normally, such a shift would be good for gold since lower interest rates make holding gold less costly. However, gold’s price hasn’t increased as expected.

On the data front, upcoming US employment reports could influence interest rate expectations. This week’s key releases include US JOLTS Job Openings on Wednesday, which are predicted to drop slightly to 8.1 million. A bigger drop could suggest a weakening job market and increase the likelihood of a larger rate cut.

Thursday’s ADP Employment Change and Jobless Claims will also be watched closely, with the most significant report being Friday’s US Nonfarm Payrolls (NFP). If NFP numbers are lower than expected, it could support the case for a larger rate cut and potentially impact gold prices.

Despite higher expectations for a significant Fed rate cut, gold prices haven’t risen. If employment reports indicate a weaker job market and support a larger rate cut, gold might eventually benefit, but currently, it’s not reacting as expected.

Geopolitical Tensions Fail to Boost Gold Demand

On the geopolitical front, there aren’t any new major events driving up gold demand. Although Russia recently carried out a large missile and drone attack on Ukraine, killing 50 people, this attack follows a pattern of similar incidents and hasn’t had a big impact on gold.

In Gaza, the situation remains tense. Israelis are protesting for a ceasefire to secure the safe release of hostages, and the US has charged Hamas leaders with crimes related to the October 7 attacks. Despite these ongoing issues, there hasn’t been a significant shift in gold demand.

Therefore, the ongoing geopolitical tensions, including Russia’s attacks and the situation in Gaza, haven’t led to a noticeable increase in gold demand. Despite these conflicts, gold prices have remained stable, suggesting that these events aren't significantly influencing its value.

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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