Gold prices remain under pressure due to a stronger USD but manage to stay above the $2,500 mark

The gold price (XAU/USD) attracted new sellers during Tuesday's Asian session, reversing part of the previous day's gains from the $2,485 level due to continued US Dollar (USD) strength. The mixed US monthly jobs report on Friday led investors to reduce their expectations for a significant interest rate cut by the Federal Reserve (Fed) in September. This boosted the USD Index (DXY), which measures the Greenback against a basket of currencies, pushing it closer to last week's monthly high and putting pressure on the non-yielding yellow metal.

Additionally, a generally upbeat tone in the equity markets has further weighed on the safe-haven appeal of gold. In the broader context, XAU/USD has been trading within a familiar range for the past three weeks as investors await more clarity on the Fed's rate-cut trajectory. Consequently, attention will be focused on the release of the latest US consumer inflation data on Wednesday. This, along with the US Producer Price Index (PPI) due on Thursday, will influence USD demand and provide fresh direction for the commodity.

Daily Digest Market Movers: Gold Price Bulls Turn Cautious Amid Sustained USD Strength, Downside Appears Limited

• Friday's mixed US employment data has diminished the likelihood of a 50-basis point rate cut by the Federal Reserve, bolstering the US Dollar and creating headwinds for gold prices.
• The CME Group's FedWatch tool indicates that traders see a 71% chance of a 25-basis-point rate cut at the upcoming FOMC meeting on September 17-18, with only a 29% chance of a 50-basis-point reduction.
• Investors are now awaiting the release of the August US consumer price data on Wednesday, which, alongside the Producer Price Index on Thursday, could shape expectations for future Fed rate cuts.
• On Friday, New York Fed President John Williams stated that inflation expectations remain well-anchored, and monetary policy could shift to a more neutral stance based on incoming data.
• Fed Governor Christopher Waller emphasized that sustaining economic momentum means it's time to begin reducing rates, expressing openness to the size of the cut.
• Additionally, Chicago Fed President Austan Goolsbee remarked that officials are finally aligning with the broader market's view that a policy rate adjustment is due.
• This suggests that the path of least resistance for non-yielding XAU/USD remains upward, with any immediate market reaction to stronger US inflation data likely to be limited.
• Meanwhile, official data released on Tuesday revealed that China's trade surplus widened from CNY601.98 billion to CNY649.34 billion in August, driven by an 8.4% increase in exports and weak import figures.

Technical Outlook: Gold Price Setup Suggests Potential Breakout from Short-Term Trading Range

From a technical standpoint, the gold price has been trading within a narrow range over the past three weeks, forming a rectangle pattern on the daily chart. Given the recent rally to its all-time high, this price action can be viewed as a bullish consolidation phase. Furthermore, daily chart oscillators remain in positive territory, reinforcing a near-term bullish outlook for gold. However, it would be prudent to await a decisive breakout above the trading range resistance or the all-time high around the $2,530-$2,532 region before positioning for further gains.

On the downside, any significant decline is likely to find initial support near the $2,485 level, followed by the $2,470 horizontal zone. This latter level marks the lower boundary of the current trading range, and a decisive break below it could trigger technical selling, leading to deeper losses. In such a scenario, gold prices might accelerate towards the 50-day Simple Moving Average (SMA), currently around the $2,446 level, with a potential decline extending to the $2,410-$2,400 region.