Gold prices fell slightly last week after posting two straight weeks of gains.
Buyers remain hopeful as XAU/USD continues to trade above the key 200-day SMA.
US inflation data for August could trigger a significant reaction in XAU/USD.
After a bearish start to the week, the price of Gold (XAU/USD) stabilized above the 200-day SMA, just below $1,920. If this support remains intact ahead of expected US August inflation data next week, investors may be reluctant to bet on further XAU/USD weakness.
What happened last week?
When macroeconomic data released in the US suggested a lack of inflation growth and relatively healthy economic activity, investors began to do so Re-examine the possibility of the Federal Reserve (Fed) raising interest rates again before the end of the year. As a result, US Treasury yields rose and the dollar continued to find demand, causing XAU/USD to remain lower in the first half of the week.
Gold prices fluctuated in a narrow range on Monday as trading volumes remained low during the US Labor Day holiday. Data from China showed early Tuesday that the services sector continued to lose growth momentum in August. The Caixin Services Purchasing Managers’ Index fell to 51.8 from 54.1 in July. As safe haven inflows began to dominate financial market action, the USD gained strength against its peers, and XAU/USD lost more than 0.5% on the day.
He The ISM Purchasing Managers’ Index for the services sector rose to 54.5 in August, indicating that economic activity in the U.S. services sector continued to expand rapidly that month. The underlying details of the report made it clear that employment in the industry was increasing while pressure on input prices was increasing. The yield on the 10-year U.S. Treasury note rose to 4.3% on Wednesday after the data was released, causing gold prices to fall below $1,920 for the first time in a week.
On Thursday, the Labor Department reported that initial claims for U.S. jobless benefits fell by 13,000 to 216,000 in the week ended Sept. 2. This is the lowest value since the beginning of February, which illustrates the tense situation on the labor market. Meanwhile, the Bureau of Labor Statistics said unit labor cost growth in the second quarter was revised upward to 2.2% from the original estimate of 1.6%. The DXY dollar index, which measures the greenback’s strength against a basket of six major currencies, rose to its highest level in nearly six months, above 105.00, following the release of the data, preventing XAU/USD from recovering.
The 10-year US Treasury yield corrected lower on the last day of the week. XAU/USD has gained a foothold and entered a consolidation phase above $1,920.
Next week
The data of the The highlight of the week will be the US Consumer Price Index (CPI) for August on Wednesday. At monthly intervals, The CPI is expected to rise 0.5%, while the core CPI is expected to rise 0.2%. Markets do not expect the Fed to raise interest rates in September, and inflation numbers are unlikely to change that view. However, CME Group’s FedWatch tool shows that investors still see a nearly 40% chance that the Fed will raise rates again before the end of the year, in either November or December.
The market’s immediate reaction to the CPI data could be simple. Stronger-than-expected monthly readings could lean on the Fed’s hawkish expectations and weigh on XAU/USDwhile a weak reading could have the opposite impact on gold prices and help them recover.
However, given current market sentiment, it is difficult to say how much room there is for gold prices to fall, even if investors lean towards further Fed tightening. The yield on the 10-year U.S. Treasury note has risen four months in a row, rising nearly 20% from May to September. Meanwhile, concerns are growing about a global economic slowdown, even as the U.S. economy has proven more resilient than other major economies.
The U.S. 10-year bond yield could be nearing its near-term cap as investors believe the combination of mixed U.S. macroeconomic data releases, the Federal Reserve’s policy outlook, and general market risk aversion point to an economic slowdown. This could lead to investors seeking refuge in government bonds with longer maturities.
In short, markets could be nearing a point where U.S. yields fall due to increased demand for Treasury bonds. Investors are more likely to adjust their positions to a possible economic slowdown than to a higher, longer-term” Fed key interest rate.
In its monthly report published on September 6, the council noted that “recent changes in yields have resulted in a ‘bearish steepening’ of the yield curve, historically presenting a more challenging environment for risk-free assets such as gold.” Gold World Cup. “However, expectations of a slowdown remain, a scenario in which gold has historically performed well,” the report said.
Technical outlook for gold prices
Despite the decline recorded in the first half of the week, the RSI (Relative Strength Index) indicator on the daily chart remained above 50, reflecting this seller’s indecision. Furthermore, XAU/USD rebounded after testing the 200-day SMA near $1,920.
The level of $1,930 (50-day SMA, upper boundary of the descending channel) presents immediate resistance ahead of $1,950 (100-day SMA, 23.6% Fibonacci retracement of the recent uptrend). A daily close above this level could attract additional buyers and help XAU/USD reach $1,980 (the static level).
When the price of gold falls below $1,920 (the 200-day SMA) and starts using this level as resistance, $1,900 (the psychological level) and $1,890 (the 38.2% Fibonacci retracement) could be established as the next bearish targets.
Gold sentiment survey
The FXStreet Currency Forecast Survey suggests a slightly bullish near-term bias, with the one-week average target at $1,937. The one-month outlook remains mostly bullish, with several experts who participated in the survey predicting XAU/USD to rise to or above $2,000 during this period.
