Gold price extended the downside on Tuesday, going further below the $2,500 psychological support to trade at $2,494 at the spot market at the time of writing. The commodity was on track to record the third successive day of decline, with the markets waiting for US PMI data. That said, gold price still has an underlying bullish momentum, with 1.9 percent in monthly gains and is up by 20.8 percent year-to-date.
The US dollar has regained some strength after recent US macroeconomic data averted fears of a potential recession. That has seen the safe haven demand for gold decline significantly in recent days, and the downward pressure is likely to stay in play at least until the US Nonfarm Payrolls numbers come out on Friday.
With last week’s PCE data showing inflation under control, it is almost given that the Fed will slash interest rates after its mid-September meeting. This view is further affirmed by Fed Chairman Jerome Powell’s dovish comments at the Jackson Hole symposium. However, the NFP data is the missing piece in defining the exact extent of interest rate cuts. That will likely keep gold prices range-bound in the intervening period to Friday.
The momentum indicators on gold price signal the strengthening of the downside trajectory. The price has been below the Volume Weighted Moving Average (VWMA) on the 2-hour chart, but has recently attempted moves above that mark. With the VWMA at the $2,498 mark, it signifies that the $2,500 mark is a significant resistance level, above which XAUUSD will strengthen the upward trajectory.
The 30-minute chart suggests that gold price will likely head downwards if the resistance stays at the 2,500 mark. That will likely establish the first support at 2,494, but extended bearish control could propel a move below that mark to test the second support at 2,490.
Alternatively, a move above 2,500 will signal control by the buyers. If that happens, we could see the first resistance at 2,506. However, extended bullish control could strengthen the upside momentum to break the first resistance, invalidate the downside narrative and test 2,511.
This post was last modified on %s = human-readable time difference 13:06