The Gold price demonstrates resilience as it hovers around the crucial 200-day Simple Moving Average (SMA), garnering some buying interest during Thursday’s Asian session. Currently trading slightly below the $1,920 level, the XAU/USD registers a modest 0.15% gain for the day, seemingly breaking its three-day losing streak after hitting a one-week low on Wednesday.
Investor sentiment remains dampened by concerns over the deteriorating economic landscape in China, coupled with persistent US-China trade tensions. This translates into a general weakness across equity markets and strengthens the precious metal’s safe-haven appeal. Additionally, the subdued performance of the US Dollar (USD) offers further support to the Gold price. However, meaningful upward movement still appears elusive.
The prospects of future tightening measures by the Federal Reserve (Fed), supported by upbeat US macro data released on Wednesday, are expected to keep the USD correction in check and limit gains for the XAU/USD. The Institute for Supply Management (ISM) reported an unexpected acceleration in business activity within the US services sector in August, with the non-manufacturing PMI rising from 52.7 in July to 54.5 – the highest level since February.
Further analysis of the report reveals an increase in new orders, indicating a resilient US economy, as well as elevated inflation pressures reflected in the higher Prices Paid sub-component. These developments bolster the chances of an additional 25 basis points (bps) rate hike by the Fed before the year’s end. Consequently, the yield on the 10-year US government bond edges closer to the peak observed on August 23, while the USD reaches its highest level since March 9.
Considering the aforementioned fundamental factors, it is advisable to await sustained buying momentum in the Gold price before confirming the completion of the recent pullback from the one-month peak near the $1,953 region, touched last Friday. Conversely, a decisive breach below the technically significant 200-day SMA is necessary to reaffirm the prevailing negative bias. Traders are now eyeing the US Weekly Initial Jobless Claims data for potential short-term opportunities.