- Gold price regains positive traction on Monday, though the uptick lacks bullish conviction.
- Looming recession fears turn out to be a key factor benefitting the safe-haven commodity.
- A modest US Dollar strength holds back bulls from placing fresh bets and caps the upside.
Gold price attracts fresh buying near the $1,995 area on the first day of a new week and maintains its bid tone through the first half of the European session. The XAU/USD is currently placed around the $2,010-$2,011 region, up over 0.40% for the day, and for now, seems to have stalled Friday’s retracement slide from the vicinity of over a one-year peak.
Looming recession fears benefit the safe-haven Gold price
Growing worries about a deeper global economic downturn turns out to be a key factor lending some support to the safe-haven Gold price amid expectations for an imminent pause in the rate-hiking cycle by the Federal Reserve (Fed). That said, impressive bank earnings seem to have eased fears about a banking crisis that unfolded in March. Adding to this, the Retail Sales report released from the United States (US) on Friday suggested that the economy is not so bad and remained supportive of a generally positive tone around the equity markets. This, along with a modest US Dollar (USD) strength, is holding back bulls traders from placing aggressive bets around the XAU/USD and capping the upside, at least for the time being.
Modest US Dollar strength keeps a lid on Gold price
Despite the softer US consumer inflation and the Producer Price Index released last week, Fed Governor Christopher Waller on Friday called for further rate hikes and said that the job was still not done as inflation remains far too high. The markets were quick to react and are now pricing in a greater chance of another 25 basis point (bps) lift-off at the next Federal Open Market Committee (FOMC) policy meeting in May. This remains supportive of elevated US Treasury bond yields, which, in turn, assists the USD to build on Friday’s goodish rebound from a one-year low and gain follow-through traction for the second successive day. A stronger Greenback tends to undermine demand for the US Dollar-denominated Gold price.
Traders now look to US macro data for short-term impetus
The aforementioned mixed fundamental backdrop warrants some caution before positioning for any further appreciating move for the XAU/USD. Nevertheless, Gold price manages to hold above the $2,000 psychological mark as traders now look to the US economic docket, featuring the release of the Empire State Manufacturing Index for a fresh impetus later during the early North American session. Apart from this, the US bond yields will influence the USD price dynamics, which, along with the broader risk sentiment, should contribute to producing short-term opportunities around the XAU/USD.
Gold price technical outlook
From a technical perspective, the emergence of fresh buying on Monday favours bullish traders and support prospects for an extension of the recent strong upward trajectory witnessed over the past month or so. That said, sustained weakness below the $1,995-$1,990 region, will negate the positive outlook and prompt some technical selling. The Gold price might then accelerate the corrective decline towards the $1,965-$1,960 intermediate support en route to the $1,950 horizontal zone.
On the flip side, bulls might now wait for some follow-through buying beyond the $2,020 area before placing fresh bets. The Gold price might then climb to the YTD peak, around the $2,047-$2,049 region touched last Thursday. The subsequent move up has the potential to lift the XAU/USD back towards retesting the all-time high, around the $2,070-$2,075 region touched in August 2020.
Key levels to watch
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The gold price is on the rise in the market, with XAU/USD trading above $2,000 for the last few days. Despite the gains, gold is facing a lack of sufficient follow-through from investors.
This week, there have been positive signs that the yellow metal has started to gain some momentum at the start of September. The excessive dollar weakness and US-China tensions contributed to the sudden spike in prices. The rally allowed XAU/USD to break above $2,000 barrier, and temporarily reach a new two-year high of $2,051.
Despite the gains, however, a lack of follow-through from investors has meant that gold prices have not further capitalized on the rally. The yellow metal is instead trading modestly above $2,000, and it is likely that the price will remain in consolidation mode in the near term.
Gold prices could be influenced by additional trade developments and data releases in the near future. The upcoming US inflation figures will be among the key releases to look out for. Higher inflation could weigh on the precious metal, as it would increase expectations for further Fed rate hikes.
The market could also be affected by headlines regarding the US election, which could have an impact on the dollar and gold prices. Analysts warn that the gold price forecast could remain uncertain until further clarity is seen regarding the fate of the US Dollar.
Overall, gold prices remain on the back of positive territory for the time being, due to lingering concerns about the US-China trade war. However, without any sustainable bullish catalysts, XAU/USD could remain rangebound above the $2,000 mark in the near term.