As we approach the 100-day simple moving average, which is currently located at the $3,316-3,315 zone, the overnight swing low, which was around $3,325, appears to be protecting the immediate downside. A crucial event that might set off the XAU/USD bears’ momentum would be a continuation of selling below the $3,311 region, which was struck on Wednesday and represents a three-week low. The daily chart shows slightly negative oscillators, and a continuing decline can push the price of gold below $3,300, towards the $3,270-3,265 strong horizontal support. The latter marks the bottom of a trading range that has been in place for three months; a break below this level would indicate that the commodity has reached its peak and could lead to additional price declines.
However, it appears that the $3,348–3,350 area has now formed a solid barrier; if the price of gold breaks through this level, a new wave of short-covering might push it up to the $3,375 area of resistance. The XAU/USD pair is aiming to challenge the $3,434-3,435 heavy supply zone, which marks the top border of a three-month-old trading range. The momentum could continue towards the $3,400 mark before then.
Essentials Review
The rising consensus that the US central bank would begin its rate-cutting cycle in September does not appear to have impacted the USD bulls. Also, gold, a safe-haven asset, isn’t getting much support from the cautious tone leading up to Fed Chair Jerome Powell’s much-anticipated address at the Jackson Hole Symposium. This strengthens the argument for more depreciation in the near future and benefits the XAU/USD bears.
Ahead of Powell’s speech, the gold price appears to be in danger.
After last week’s release of the US Producer Price Index (PPI), which indicated hints of a pickup in momentum in inflationary pressures, traders reduced their bets on a more aggressive policy easing by the US Federal Reserve. In addition, Kansas City Federal Reserve President Jeffrey Schmid was hesitant about a rate cut in September and characterized the central bank’s present monetary policy stance as “modestly restrictive” on Thursday.
In a separate statement, President Beth Hammack of the Cleveland Federal Reserve stressed the need to keep inflation under control by implementing a slightly restrictive policy. According to Hammack, the main worry is the excessively high and negatively trending inflation rate. For the second day in a row, this has put downward pressure on the non-yielding Gold price, and it has helped the US dollar maintain its weekly gains, which it has reached its best level since August 6.
In the meantime, Chicago Fed President Austan Goolsbee expressed some reservations about lowering interest rates in light of recent inflation figures in an interview with Bloomberg TV. On the other hand, according to Goolsbee, action on monetary policy could take place during the September policy meeting. Additionally, in light of the potential for poorer employment and higher tariffs, Boston President Susan Collins has indicated her willingness to consider a rate drop as early as next month.
Traders anticipate two 25 basis point rate cuts before year’s end and price in a 75% chance that the Fed will drop borrowing costs in September, according to the CME Group’s FedWatch Tool. Statistics released on Thursday confirmed the predictions, showing a three-month high in jobless claims and the biggest weekly total for those receiving unemployment benefits in nearly four years.
So, investors will be watching Federal Reserve Chair Jerome Powell’s address at the Jackson Hole Symposium attentively for any new signals regarding the course of rate cuts. This, in turn, will have a significant impact on the dynamics of the USD price in the near future and decide the next step for the unyielding yellow currency’s directional movement.
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