GOLD Price Analysis – Aug 28, 2023

Daily Price Outlook

Despite the expectations of another rate hike by the Federal Reserve in 2023 and the prevailing risk-on sentiment, the price of gold (XAU/USD) has continued its upward rally, commencing the new week on a bullish note, hovering around the $1,915 level. This upward trajectory in gold's value seems to be closely tied to the weakening US dollar, which has started the week on a more subdued trajectory, retracting from its peak level since early June. This, in turn, is viewed as a significant factor bolstering the price of gold. A weaker Greenback typically benefits US Dollar-denominated commodities, such as XAU/USD.

As of now, XAU/USD is trading around the $1,916 mark, with gains of slightly less than 0.10% for the day. However, it remains below the peak it reached two weeks ago, recorded last Thursday. Looking ahead, traders appear to be exercising caution and refraining from making substantial bids in anticipation of critical US macroeconomic releases scheduled for this week, with particular attention being given to the highly anticipated Non-Farm Payrolls (NFP) report set to be released on Friday.

Gold Prices Supported by Weaker Dollar, but Fed's Rate Hike Concerns Linger

The broad-based US dollar started the week on a weaker note, stepping back from its highest level since early June. This initially provided support for gold prices (XAU/USD), as commodities like gold often benefit from a weaker dollar. However, the confidence in the gold market is lessened by concerns regarding the Federal Reserve's intentions to raise interest rates as a measure to control inflation.

Fed Chair Jerome Powell recently made remarks at the Jackson Hole Symposium, suggesting that the Fed might consider raising interest rates soon. This has made investors cautious, as higher interest rates can make assets like bonds more appealing compared to gold, which does not offer interest yields.

The market is analyzing Powell's statements to imply a potential 25 basis points rate increase by the end of the year. This expectation is boosting US Treasury bond yields and, consequently, lending support to the US dollar. As a result, while the weaker dollar is providing some support to gold prices, the possibility of further interest rate hikes by the Federal Reserve is preventing traders from making substantial bullish bets on gold. They are awaiting further developments in the Fed's strategy and how it might impact the broader financial landscape before making significant moves in the gold market.

China's Measures and Market Sentiment Impact on Gold

Moreover, the risk-on sentiment, fueled by China's recent measures, could limit gains in gold prices. China announced a reduction in stamp duty on stock trading to boost its market and investor confidence. The levy on stock trades will decrease from 0.1% to 0.05% starting August 28, the first cut since 2008. This supports a positive tone in equity markets and might discourage bullish bets on XAU/USD.

Looking ahead, investors will closely monitor the gold market. With a quiet Monday in terms of significant US economic news, gold's performance will depend on the US dollar and market sentiment. Expect limited fluctuations until pivotal US data, especially the Non-Farm Payrolls report on Friday, is released.

GOLD (XAU/USD) - Technical analysis

Gold prices made an effort to surpass the $1913.15 mark, yet concluded last Friday's session above this threshold. This sustains our optimistic forecast, bolstered by the positive trajectory indicated by the stochastic, as well as the upward pressure provided by the EMA50. Our projected price milestones commence at $1929.00, extending up to $1945.20.

Conversely, it's pivotal to highlight that a dip below the $1913.15 mark could disrupt this bullish outlook, steering the price towards a renewed downtrend.

For today, the anticipated price fluctuation is predicted to oscillate between a support of $1900.00 and a resistance of $1935.00.