Gold (Xau/USD) touched on a new record high of nearly $3,790 before revising the lower ranks.
Investors will scrutinise high-rise data releases from the US to determine whether Xau/USD rallies can continue in the short term.
Gold enters a consolidation phase below the record peak
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Escalating geopolitical tensions allowed Kim to gather bullish momentum at the beginning of the week. News that NATO forces had stolen three Russian MIG-31 fighter jets after entering Estonian airspace protected investors and increased demand for safe shelters.
After rising more than 1.5% on Monday, Xau/USD continued to push highs early on Tuesday, hitting a new all-time high at $3,791. Xau/Eur and Xau/GBP also hit record heights after disappointing the data release of the Manager’s Index (PMI) that they showed that gold was able to acquire capital outflows from the Euro and Pound Sterling.
Later on the 1st, Federal Reserve Chairman Jerome Powell’s updated US Dollar (USD) intensity in a careful tone on policy measurements indicated that private sector business activity continues to expand at a healthy pace, with XAU/USD retreating.
While talking about Tuesday’s economic outlook, Powell repeated to make sure that a one-off price rise does not become an ongoing inflation problem. He further looked at labour market, growth and inflation data to assess whether policies are in the right place before the next meeting.
The US dollar continued to outperform its rivals on Wednesday after data showed new home sales rose 20.5% in August and eased concerns about the situation in the housing market. USD gained even more bullish momentum on Thursday after the US Economic Analysis Agency (BEA) announced it had revised its growth in gross domestic production (GDP) for the second quarter from 3.3% of its previous estimate to 3.8%.
Additionally, durable product orders rose 2.9% in August, significantly exceeding market expectations for a 0.5% decline, with weekly unemployment claims falling from 232,000 the previous week to 218,000. The wide range of USD strength left Xau/USD in the consolidation phase of approximately $3,750 later in the week.
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This week’s final data release showed that annual inflation in the US, measured by changes in the personal consumption expenditure (PCE) price index, rose from 2.6% in July to 2.7% in August. The Core PCE Price Index, which excludes volatile food and energy prices, rose 2.9% over the same period, consistent with the July increase and analyst estimates. These numbers were largely ignored by market participants.
But a bullish opening on Wall Street left USD with some interest and allowed money to grow higher in Friday’s US session.
Gold investors look at US data to assess the Fed’s policy outlook
The US Economic Calendar provides several high-rise data releases that could impact market pricing in the Fed’s policy outlook and drive gold valuations in the near future.
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The CME Group FedWatch tool shows that the market is widely expecting it to choose another 25 base point (BPS) rate reduction in October. The chances of further reductions in December rates will be about 60% down from nearly 80% before the US data above. Powell and several other policymakers acknowledged the increased risks to the labour market, explaining that interest rate cuts in September would be a good option to offset these risks.
On Tuesday, the U.S. Bureau of Labor Statistics (BLS) will release its Jolts Job Openings data for August. This is widely seen as an indicator of lagging, but there is a noticeable decline with a significant positive surprise that reads below 7 million or above 7.5 million.
Changes in ADP employment and September ISM manufacturing PMI data will be viewed in close view mid-week. If private sector payroll increases above 70,000 and headline manufacturing PMI recovers to an expansion area above 50, USD can maintain its strength and lower Xau/USD.
Non-farm pay (NFP) could increase market volatility on Friday. After gross readings over the past few months, another unfortunate NFP print could reaffirm the December Fed rate cut and place emphasis on the US dollar and US Treasury bond yields.
In this scenario, gold can gather bullish momentum heading into the weekend. Conversely, if NFP exceeds 70,000 and alleviates concerns about labor market conditions, USD will extend the gathering and weigh heavily on Xau/USD.
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Gold Technical Analysis
Despite recent pullbacks, gold remains technically over-acquired with daily chart relative strength index (RSI) indicators well above 70. Nevertheless, Xau/USD remains within the top half of the nine-month promotion channel, well above the trading (SMA) that is well above the 20-day simple moving average (SMA), suggesting that bullish bias has technical correction potential.
On the downside, $3,670 (midpoint of the upward regression channel, 20-day SMA) aligns as initial support, followed by $3,500-3,480 (static, round level, 50-day SMA). Looking north, the initial resistance levels can be found at $3,790-3,800 (recorded round level), $3,860 (upper channel cap) and $3,900 (round level).
