Gold Price (XAU/USD) maintains its resilience, grasping its position at a three-week pinnacle, hovering around $1,937-38 as the first rays of Wednesday’s Asian trading session emerge. In this steady course, the precious metal basks in the diminution of the US Dollar’s prowess, just in time for the arrival of pivotal United States (US) data. The atmosphere is further enhanced for XAU/USD as the stage is set by the gloomy US Treasury bond yields and optimism in the realm of China’s forthcoming stimulus initiatives. Nevertheless, recent headlines encompassing the intricacies of US-China ties and the International Monetary Fund’s (IMF) cautious stance on the future allotment of Special Drawing Rights (SDRs) appear to stir the Gold aficionados prior to the impending dissemination of second-tier US statistics.
Gold Price Demonstrates Vigor as Softer United States Data Impact Dollar and Yields
The trajectory of Gold Price exhibits a trajectory that surpasses the 50-day Simple Moving Average (SMA), embarking on the most substantial ascent witnessed within a week. This surge comes on the heels of a compelling challenge posed by the United States data to the hawkish posture of the Federal Reserve (Fed) on Tuesday. Further fueling the ascendancy of XAU/USD are notions of additional stimulus emanating from China, a colossal consumer of Gold, and the subdued performance of US Treasury bond yields.
Tuesday witnessed the US Conference Board’s (CB) Consumer Confidence Index plummeting to 106.10 in August, a significant decline from the revised downward value of 114.00 (initially 117.0). These figures contrasted with the market’s projection of 116.0. Additionally, the US JOLTS Job Openings indicator plummeted to its lowest point since March 2021, recording 8.827 million job openings for July, falling short of the anticipated 9.465 million and the previous 9.165 million (revised from 9.582 million). Simultaneously, the US Housing Price Index observed a decline to 0.3% MoM for June, down from the preceding 0.7%. The S&P/Case-Shiller Home Price Indices, however, displayed an improvement of -1.2% YoY from the preceding -1.7%, surpassing market forecasts of -1.3%.
It is imperative to recognize that the predominantly lackluster US data has instigated apprehensions concerning the Federal Reserve’s potential policy shift scheduled for September. This uncertainty is palpable through the CME’s FedWatch Tool, which indicates a reduced likelihood of a rate hike, shifting from 20% to 16%. These evolving dynamics have cast their influence on Wall Street, culminating in a three-day surge for the benchmark indices. Conversely, this sentiment has weighed down the US Treasury bond yields, subsequently impacting the US Dollar’s performance. Consequently, the US Dollar Index (DXY) experienced its most substantial decline within a span of six weeks, settling at approximately 103.50 in recent trading sessions.
Simultaneously, discussions surrounding prospective rate cuts from the People’s Bank of China (PBoC) and a potential reduction in mortgage rates by the Dragon Nation have contributed to the optimism harbored by Gold buyers. Yet, the concerns articulated by US Commerce Secretary Gina Raimondo regarding the obstacles faced by US corporations in China have ignited the bullish drive for XAU/USD. Correspondingly, the International Monetary Fund’s (IMF) inclination to exercise prudence in the allocation of Special Drawing Rights (SDRs) in light of the current landscape characterized by elevated interest rates and inflation has amplified the resonance of such concerns.
US Labor Market Dynamics and Inflation Indicators: Pivotal to XAU/USD Trajectory
After the exhilarating ascent prompted by the weakening US Dollar, the Gold Price may encounter a phase of consolidation in anticipation of preliminary indications from US employment and inflation indicators. Among the indicators to be closely monitored are the US ADP Employment Change, the final evaluations of the US second-quarter (Q2) Gross Domestic Product (GDP), and the Personal Consumption Expenditure (PCE). The insights gleaned from these metrics are pivotal as they hold the potential to amplify the difficulties faced by Federal Reserve (Fed) hawks, thereby potentially enabling XAU/USD to surpass the immediate resistance point at $1,945, as elucidated below.
Additionally, in-depth analysis: Gold Price Projection: XAU/USD Sustains Rally Amid Broad US Dollar Decline
Technical Examination of Gold Price
The Gold Price exhibits a robust stance, not only retaining its position above the $1,910 support confluence but also surmounting the 50-day Simple Moving Average (DMA), as it beckons to buyers from its zenith achieved in three weeks.
The bullish momentum is further bolstered by the indications derived from the Moving Average Convergence and Divergence (MACD) indicator and the relatively steadfast positioning of the Relative Strength Index (RSI) line, stationed at 14, well within the bounds of being overbought.
The landscape painted by these technical facets suggests that Gold Price is on the cusp of a foray into the $1,945 pivotal resistance. This threshold encapsulates the 50% Fibonacci retracement of the ascent witnessed between February and May, seamlessly merging with a descending trend line tracing back to the zenith attained in May of the current year.
Notwithstanding this potential ascent, the attainment of a daily closure surpassing the aforementioned $1,945 resistance juncture will present the Gold buyers with an opportunity to set their sights on the preceding peak achieved during the previous month, approximating $1,987, prior to confronting the psychological barrier posed by the $2,000 threshold.
Conversely, the 50-day DMA in close proximity to $1,930 will act as a barrier against immediate downward momentum for XAU/USD, proffering a shield to prevent the descent towards the $1,910 support nexus, encompassing the 200-day DMA and the 61.8% Fibonacci retracement, popularly known as the Golden Ratio.
Should the Gold Price’s resilience falter beneath the $1,910 level, the subsequent hurdles await, with the $1,900 round figure closely followed by the monthly nadir approximating $1,885, effectively offering a challenge to the bearish sentiment. This course culminates in an expanse of horizontal support spanning multiple levels, identifiable from the delineations of February and the initial days of March, clustered around the range of $1,858–61.