- Gold price remains higher at a four-week high, confirming the bullish chart pattern of a falling wedge.
- Worries of a Federal Reserve policy shift in the United States boost XAU/USD prices.
- Treasury bond yields are falling, while China’s stimulus is boosting the gold price.
- China’s official PMI, Eurozone and US inflation indicators are all looking for a new boost.
Gold Price (XAU/USD) rises to its highest level in four weeks, confirming a positive chart pattern on early Thursday, up 0.10% intraday near $1,945 at the time of publication. In doing so, the precious metal applauds the general weakness of the US dollar, as well as optimism that China’s stimulus will entice purchasers. However, the cautious tone ahead of the Federal Reserve’s (Fed) favored inflation gauge, the US Core Personal Consumption Expenditure (PCE) Price Index for August, has recently propelled the XAU/USD bulls.
The gold price is rising due to fears about the Federal Reserve’s policy turn and Chinese stimulus.
Despite the recent cautious performance of XAU/USD traders, gold price attracts bids at multi-day highs, as recently gloomy US data strengthened forecasts of an earlier end to the Federal Reserve’s (Fed) bullish cycle. The stronger feeling toward China, one of the world’s largest Gold purchasers, is also in favor of Gold buyers.
Gold purchasers were enticed by a disappointment in the early signal of Friday’s Nonfarm Payrolls (NFP), as the ADP Employment Change fell to 177K, compared to 195K market predictions and 371K previous readings (raised from 324K). In the same vein, the second readings of the US second quarter (Q2) Gross Domestic Product (GDP) Annualized fell to 2.1% from 2.4% in the first readings, while the GDP Price Index fell to 2.0% from 2.2% in the first readings. Furthermore, early readings of Personal Consumption Expenditures (PCE) Prices for the same period fell to 2.5% from 2.6% previously estimated.
It’s worth mentioning that prior US Consumer Confidence and Activity statistics, as well as housing market numbers, encouraged dovish calls regarding the US central bank and weighed on the US Dollar, propelling the Gold Price.
Furthermore, China’s reply to US claims that “it’s being risky for businesses” called into question previous prospects of a smooth run of the Sino-American negotiations in Beijing, which in turn investigated the XAU/USD buyers earlier on Wednesday. However, a wave of Chinese banks cut mortgage rates and backed the prospect of more stimulus from the Asian giant, which in turn repaired sentiment and defended gold buyers.
Against this environment, the US Dollar Index (DXY) fell for three straight days to its lowest level in two weeks, at 103.15-10 recently. Nonetheless, the benchmark US 10-year Treasury bond yields have fallen to their lowest level in three weeks, hovering around 4.11% at the time of publication.
Many catalysts stand tall to put the XAU/USD bulls to the test.
While the Fed’s dovish concerns and confidence about China boost the gold price, a flood of economic data from China, the US, and the Eurozone will put the XAU/USD buyers to the test. China’s official NBS Manufacturing PMI and Non-Manufacturing PMI for August will be the first to test the metal’s upward trend. Following that, Eurozone inflation is measured using the Consumer Price Index (CPI) and the European Central Bank’s (ECB) preferred gauge, the Harmonized Index of Consumer Prices (HICP). Above all, the Fed’s favorite inflation gauge, the August US Core Personal Consumption Expenditure (PCE) Price Index, will be critical in accurately forecasting Gold Price movements.
Technical Analysis of the Gold Price
A confirmation of the four-month-old falling wedge bullish chart pattern joins price-positive signs from the Moving Average Convergence and Divergence (MACD) indicator and the Relative Strength Index (RSI) line, both of which are at 14.
It is worth noticing, however, that the RSI line is rapidly entering overbought area, implying that the XAU/USD has limited upside potential.
As a result, during the run-up toward the theoretical target of the indicated wedge breakout, near $2,140, a horizontal area including numerous levels established since late May, around $1,984-85, and the yearly top marked in May close to $2,067, can confront Gold purchasers.
Meanwhile, the Gold Price remains illusive unless it breaks beyond the $1,930 50-day Simple Moving Average (SMA).
The 200-SMA and 61.8% Fibonacci retracement of the February-May upward, commonly known as the Golden Fibonacci Ratio, will then test the XAU/USD sellers around $1,913 and $1,910, in that order.
Above all, gold purchasers remain optimistic as long as the commodity continues above the specified wedge’s bottom line, which was around $1,883 at the time of publication.
Gold Price: Daily chart