The price forecast for gold (XAU/USD) is drawing attention as bullish momentum propels it past the early August swing high and maintains its stronghold above the $1,936-38 support confluence. This surge comes amidst the decline of the US Dollar, triggered by concerns surrounding the Federal Reserve’s policy shift, particularly in light of recent disappointing economic figures. Consequently, the US Dollar Index (DXY) has halted its two-day winning streak, experiencing minor losses at approximately 104.15.
Apart from the weaker US Dollar, bullish sentiment for XAU/USD is further fueled by China’s efforts to safeguard its economy, given its significant status as one of the world’s largest consumers of gold. China has implemented various measures, including the establishment of a specialized division to promote the private economy and the removal of barriers in the services sector. Furthermore, the People’s Bank of China (PBoC), the country’s central bank, recently announced a substantial reduction in its foreign exchange reserve requirement ratio (FX RRR) from 6.0% to 4.0%, effective from September 15. Additionally, several Chinese banks have lowered interest rates on Yuan deposits to alleviate pressure following previous announcements of reduced mortgage rates.
Furthermore, the underwhelming performance of US Treasury bond yields in the past two weeks has also bolstered the rebound of the gold price, particularly as XAU/USD maintains its resilience above crucial technical support levels.
Looking ahead, the shortened trading week poses a test for gold buyers, exacerbated by the ongoing tension between the United States and China. Nevertheless, the release of key data such as the US ISM Services PMI, China’s inflation figures, and stimulus announcements from Beijing are expected to keep bullion traders engaged.
Key Levels to Monitor for Gold Price
According to our Technical Confluence indicator, the gold price demonstrates strength above the $1,936-38 support confluence, which comprises the Fibonacci 61.8% on the one-month timeframe, the 5-day moving average (DMA), and the lower band of the Bollinger on the four-hour (4H) chart.
Additionally, the $1,942 level acts as resistance in the short term, encompassing the Fibonacci 38.2% on the one-day timeframe, as well as the middle band of the Bollinger on the hourly and 4H charts.
However, it should be noted that weakness in the gold price below $1,936 would require confirmation from the $1,932 level to convince sellers. This support confluence includes the 50-day moving average (DMA) and the Pivot Point one-day S1.
On the upside, the previous monthly high of approximately $1,967 is an enticing target for XAU/USD buyers in its further advances. Subsequently, attention shifts to an area marked by multiple obstacles encountered in May and July, around $1,985.
Overall, the gold price faces relatively few obstacles on its upward trajectory, but data from the US and developments in China may pose tests for the bulls.