Gold prices exhibit slight upward movement during the Asian session on Thursday, signaling a halt to a two-day decline that led to a nearly three-week low in the $1,906-$1,905 range reached the previous day. XAU/USD is currently trading just above the $1,910 mark, albeit lacking strong bullish momentum. Despite this, the fundamental landscape appears somewhat favorable for bearish traders, suggesting the possibility of an extension of the two-week downtrend that initiated after reaching a one-month peak near the $1,953 zone on September 1.
With no major surprises expected from the United States (US) consumer inflation data, market participants now have growing confidence that the Federal Reserve (Fed) will maintain interest rates at the upcoming policy meeting. Consequently, the US Dollar (USD) bulls are on the defensive, providing some support to gold prices. According to the US Bureau of Labor Statistics (BLS), the headline US Consumer Price Index (CPI) surged to 3.7% on an annual basis in August, up from 3.2% in July. While slightly exceeding the anticipated 3.6%, the monthly CPI matched forecasts, recording a 0.6% increase.
Furthermore, the core CPI, excluding volatile items such as food and fuel, also met consensus estimates with a 4.3% rise during the reported month. Nonetheless, the data indicates persistent inflation, keeping the possibility of another Fed rate hike before year-end alive. Currently, market pricing suggests a greater than 50% chance of a 25 basis points (bps) increase either in November or December. This may continue to benefit the Greenback and restrain substantial upward movements in gold, prompting caution among aggressive bullish traders.
From a technical perspective, the recent break below the crucial 200-day Simple Moving Average (SMA) this week indicates that XAU/USD’s path of least resistance remains downward. Consequently, any subsequent price increase may still be viewed as an opportunity to sell and may face limitations. Bearish traders, however, may prefer to await confirmation with a move below the psychological $1,900 mark before considering further declines. Investors are eagerly awaiting the outcome of the highly anticipated European Central Bank (ECB) meeting for potential market direction regarding gold prices.
In addition, traders will closely monitor the US economic calendar, including the release of the usual Weekly Initial Jobless Claims, the Producer Price Index (PPI), and monthly Retail Sales figures. These data points may influence USD price dynamics, and in combination with post-ECB market volatility, offer short-term trading opportunities related to gold prices.