GOLD Price Analysis – Sep 05, 2023

Daily Price Outlook

Gold price (XAU/USD) failed to stop its losing streak and dropped for the second straight day on Tuesday. The XAU/USD is currently trading just below the $1,940 level, down less than 0.10% for the day. The combination of factors is contributing to this downward pressure on gold. However, the optimism over more stimulus from China continues to weigh on the safe-haven metal. In the meantime, the Fed is expected to maintain higher interest rates for an extended period. This policy stance supports elevated US Treasury bond yields, which, in turn, provide some strength to the US Dollar (USD). Consequently, this strength in the USD acts as a deterrent for gold, given that gold is a non-yielding asset.

Gold Price Outlook Amidst Fed Policy and Labor Market Dynamics

Despite indications of an improved US labor market, the Federal Reserve is anticipated to persist with its policy of maintaining higher interest rates for an extended period. In fact, some market analysts are even contemplating the possibility of a 25 basis point rate hike by year-end. This situation supports elevated US Treasury bond yields and strengthens the US Dollar while putting downward pressure on non-yielding Gold prices.

At the same time, the central bank is likely to maintain interest rates at their current levels during its September meeting. This decision is primarily attributed to the mixed nature of the US job data, where a better-than-expected Non-Farm Payrolls (NFP) figure was offset by a downward revision of the previous month's data and an unexpected uptick in the unemployment rate. Besides, Average Hourly Earnings declined from 4.4% to 4.3% annually, signaling a minor weakening in the labor market. This restrained room for the Fed to raise rates further keeps USD bulls cautious and lends support to Gold priced in US Dollars.

Therefore, it's prudent to wait for sustained selling to confirm whether the recent recovery from the $1,885 level, the lowest since March 13, has concluded and whether aggressive bearish bets on XAU/USD are justified.

China's Stimulus Measures and Positive Risk Sentiment Impact Gold

Furthermore, optimism about China's potential stimulus measures to bolster its economic recovery weakens demand for the safe-haven XAU/USD. China recently injected more US dollars into its economy and eased mortgage rules to aid the property sector, with Country Garden Holdings postponing some payments. China's National Development and Reform Commission (NDRC) plans to create a department to support the private economy, boosting investor confidence. However, the downside for Gold prices appears limited due to expectations that the Federal Reserve is approaching the end of its interest rate hike cycle.

GOLD(XAU/USD) - Technical Analysis

The gold price faced resistance at the $1,945.20 threshold, subsequently pivoting to a bearish trajectory and descending past the $1,938.50 marker. This sets the stage for anticipated downward dynamics in ensuing sessions. This movement is underscored by the manifestation of a double top formation, indicating bearish objectives, initially targeting the $1,929.00 mark. A breach here could set sights on a primary target at $1,913.15.

Given this context, a bearish inclination is projected for today. However, it's crucial to note that a successful move beyond $1,945.20 could reinvigorate the bullish trend, steering the precious metal toward $1,960.00 as a subsequent focal point. The anticipated trading band for today spans a support level of $1,920.00 and a resistance at $1,945.00.