GOLD Price Analysis – Sep 01, 2023

Daily Price Outlook

The price of Gold (XAU/USD) has continued its upward trajectory and gained some further traction after experiencing an uptick to the $1,944 region during the Asian session on Friday. It is currently trading just below the $1,950 level, with little change for the day. Moving on, traders seems hesitant to place any significant position as they eagerly awaiting the release of the highly anticipated monthly employment report from the United States (US), known as the Non-Farm Payrolls (NFP) report. This data, set to be released later in the early North American session, will significantly impact expectations concerning the Federal Reserve's (Fed) next policy move. Consequently, it will determine the short-term direction of the US Dollar and provide substantial momentum for the Gold price.

In the meantime, the uncertainty surrounding the Fed's future stance on interest rate hikes is hindering the USD from capitalizing on its overnight rebound from a two-week low. Instead, it is acting as a supportive factor for the Gold price. Furthermore, China has implemented several measures to protect its economy and prevent a return to the challenging economic conditions seen during the height of the COVID-19 pandemic. These actions have provided support for the Gold Price, as China is a major consumer of the gold.

Recent U.S. Economic Data and Its Impact on Gold and the U.S. Dollar

It's worth noting that recent U.S. economic data, like the ADP report and the second estimate of Q2 GDP, suggested that the strong U.S. economy might be slowing down. This led to speculation that the Federal Reserve might need to ease its aggressive stance on raising interest rates sooner than expected. However, the U.S. Personal Consumption Expenditures (PCE) Price Index released on Thursday still leaves room for one more small rate increase in 2023, prompting a brief recovery in the U.S. dollar.

On the other hand, the belief that the Fed will keep interest rates higher for a longer time has prevented U.S. Treasury bond yields from dropping significantly from recent highs. This, coupled with generally positive sentiment in U.S. stock futures, is limiting the upward potential for Gold, ahead of important U.S. economic data.

China's Economic Measures and Expectations on Interest Rates Impacting Gold Price

Furthermore, China has taken several steps to protect its economy from COVID-like setbacks, which has provided some stability to the Gold Price. China is a significant buyer of gold in the XAU/USD market, and measures like the People's Bank of China's 2.0% reduction in the foreign exchange reserve ratio and various Chinese banks lowering Yuan deposit rates have garnered attention.

Besides this, the general expectation that the trend of raising interest rates might be ending, especially with recent lower inflation numbers in major economies, is supporting Gold buyers. Looking ahead, the upcoming U.S. Nonfarm Payrolls (NFP), Unemployment Rate, and Average Hourly Earnings data for August will be crucial in providing a clear direction. Recent data has hinted at a more cautious stance from the Federal Reserve, suggesting that strong outcomes in these figures are needed to boost the Gold Price.

GOLD (XAU/USD) - Technical analysis

The gold price failed to surpass the $1,945.20 mark, leading to a downward trajectory with an anticipated initial target at $1,929.00. A breach of this threshold could further drive the price down to $1,913.15.

Given these dynamics, the outlook for upcoming sessions leans bearish. A dip below $1,937.00 could expedite the journey to the projected targets. However, it's essential to note that should the gold price break above $1,945.20, a recovery could ensue, potentially propelling prices towards the $1,960.00 mark. Today's anticipated trading range for gold is set between a support level of $1,925.00 and a resistance level of $1,950.00.