Gold price consolidates below $2,500 mark, bullish potential seems intact

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  • Gold price stalls the post-NFP retracement slide from the vicinity of the all-time peak.

  • Reduced bets for a larger rate cut by the Fed underpin the USD and act as a headwind.

  • Worries about the US economic slowdown and geopolitical risks continue to offer support.


Gold price (XAU/USD) witnessed an intraday turnaround from the vicinity of the all-time peak and dropped back below the $2,500 psychological mark following the release of the key US monthly employment details on Friday. The mixed US jobs report reduced the likelihood of a larger 50 basis point rate cut by the Federal Reserve (Fed), which, in turn, prompted some US Dollar (USD) short-covering and exerted some pressure on the precious metal.


That said, worries about a US economic downturn temper investors' appetite for riskier assets and act as a tailwind for the safe-haven Gold price. Apart from this, the lack of progress in ceasefire negotiations between Israel and Hamas turned out to be another factor lending support to the XAU/USD during the Asian session on Monday. This warrants caution for bearish traders amid the prospects for an imminent start of the Fed's rate-cutting cycle. 


Daily Digest Market Movers: Gold price struggles to gain any meaningful traction amid mixed cues


The US Bureau of Labor Statistics (BLS) reported on Friday that Nonfarm Payrolls (NFP) rose by 142,000 in August as compared to 160,000 expected and the previous month's downwardly revised reading of 89,000.


Other details of the report showed that the Unemployment Rate edged lower to 4.2% from 4.3% in July and wage inflation, as measured by the change in Average Hourly Earnings, rose to 3.8% from the 3.6% previous.


According to the CME Group's FedWatch tool, the markets are pricing around a 70% chance of a 25-basis-points rate cut by the Federal Reserve later this month and the probability of a 50-bps reduction stands at 30%. 


The US Dollar, which initially fell after the release of the jobs data, soon gained ground and traded slightly higher during the Asian session on Monday, which, in turn, is seen acting as a headwind for the Gold price. 


Meanwhile, the mixed US jobs data provided clear evidence of a sharp deterioration in labor market and weighed on investors' sentiment amid persistent geopolitical tensions, offering support to the safe-haven XAU/USD.


Data published by the People's Bank of China (PBOC) showed on Sunday that the country's gold holdings stood at 72.8 million fine troy ounces at the end of August, unchanged for the fourth successive month.


Meanwhile, the markets reacted little to the latest Chinese inflation figures, showing that consumer prices rose for the seventh consecutive month in August, while producer price deflation persisted.


Technical Outlook: Gold price remains confined in a multi-week-old trading range, around $2,500


From a technical perspective, the Gold price has been oscillating in a familiar range over the past three weeks or so. This constitutes the formation of a rectangle on short-term charts and points to indecision among traders over the next leg of a directional move. The range-bound price action, however, might still be categorized as a bullish consolidation phase against the backdrop of a strong rally to the all-time peak. Moreover, oscillators on the daily chart – though have been losing traction – are still holding in the positive territory. Hence, any subsequent slide might still be seen as a buying opportunity near the $2,471-2,470 horizontal support. 


The latter marks the lower boundary of the trading range and should act as a key pivotal point. A convincing break below might prompt some technical selling and expose the 50-day Simple Moving Average (SMA) support, currently pegged near the $2,443-2,442 region. The downward trajectory could extend further towards the $2,400 round-figure mark en route to the 100-day SMA, around the $2,390-2,389 zone. On the flip side, any meaningful move up now seems to confront stiff resistance near the $2,520 region ahead of the $2,530-2,532 area, or the all-time peak. Some follow-through buying will be seen as a fresh trigger for bullish traders and set the stage for a further near-term appreciating move.

Read more

  • US October PPI Preview: Fed Rate Hike Expectations Rise, PPI May Be Key Variable; How Will US Stocks, Dollar, and Gold Move?
  • Gold Extends Slide Below $4,000 as Rising US Inflation, Fed December Hike Bets Pressure Prices
  • * The content presented above, whether from a third party or not, is considered as general advice only.  This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.

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