Gold prices are surging, nearing a one-month high, driven by a weakening dollar and growing speculation that the U.S. Federal Reserve will abstain from increasing interest rates this month. Spot gold has seen a 0.22% rise, reaching $1,944.90 per ounce, and U.S. gold futures are following suit. The market’s recent trading activity, encompassing the wide fluctuations from last Friday, suggests impending volatility.
Mixed Sentiments in Light of Labor Market Data
Recent U.S. employment figures for August revealed a surge in job growth. However, this was overshadowed by an uptick in the unemployment rate, which now stands at 3.8%, and a slowdown in wage increases. This mixed data is further fueling expectations of a Fed pause in interest rate hikes, supported by a substantial 93% probability according to the CME FedWatch tool.
Economy: Cooling, Yet Resilient
A combination of economic indicators pointing toward moderating inflation and an easing labor market is bolstering the belief that the U.S. economy is gently navigating toward a stable trajectory. Should the Fed decide to hold interest rates steady, it is likely to keep the dollar’s strength in check , providing additional support to gold prices.
Yields and the Fed’s Verdict
Given that gold often moves inversely to interest rates, traders are closely scrutinizing Treasury yields as a key factor influencing gold’s future price. This week, the market eagerly anticipates insights from speeches by at least seven Fed officials, leading up to the next policy meeting scheduled for September 19-20.
Optimism Anchored in Technical Analysis
From a technical perspective, gold’s outlook appears increasingly favorable. The precious metal has traded above its 50-day moving average for four consecutive sessions, establishing a new support level at $1,930. Combined with the expected halt in interest rate hikes, this paints a cautiously optimistic short-term picture for gold.
Gold (XAU/USD) presents intriguing dynamics on its 4-hour chart. The current trading price rests at 1943.95, exhibiting a slight dip from its previous 4-hour position at 1945.15. Nevertheless, it is noteworthy that the price maintains a position above both the 200-4H moving average (1932.75) and the 50-4H moving average (1927.87), indicating a bullish inclination in the short term. The 14-4H RSI indicator, at a value of 58.43, echoes this sentiment.
Positioned above the neutral threshold of 50, it suggests robust market momentum. Furthermore, as the price approaches the primary resistance zone spanning from 1946.99 to 1954.88, it remains comfortably distant from the primary support range, extending between 1893.07 and 1885.79. Collectively analyzing these factors , the prevailing market sentiment for gold leans favorably toward a bullish outlook.