- Gold prices dip in early Wednesday’s European session.
- Escalating geopolitical tensions in the Middle East and rising expectations of a Fed rate cut could lend support.
- The JOLTS Job Openings report and the Fed Beige Book are set for release later on Wednesday.
Gold prices (XAU/USD) rebound from multi-day lows but remain below the $2,500 mark amid renewed strength in the US Dollar (USD) on Wednesday. However, ongoing geopolitical risks and the likelihood of imminent Federal Reserve (Fed) rate cuts may support the yellow metal in the near term.
Later on Wednesday, the release of the JOLTS Job Openings and the Fed Beige Book will be closely watched by investors. Additionally, the highly-anticipated US August Nonfarm Payrolls (NFP) report, due on Friday, could be crucial in shaping expectations for the Fed’s September policy meeting. If the report falls short of expectations, it could heighten concerns about a US recession and increase speculation about faster rate cuts. This scenario could further bolster gold, as lower interest rates reduce the opportunity cost of holding non-yielding assets like gold.
Daily Market Digest: Gold prices decline as the US Dollar strengthens.
China’s Caixin Services PMI fell to 51.6 in August, down from 52.1 in July, significantly missing the market consensus of 52.2.
"We see evidence that speculative positioning in gold is effectively maxed out for the time being. The pressure on gold from the rising dollar aligns with our view on positioning," said Daniel Ghali, a commodity strategist at TD Securities.
The US ISM Manufacturing PMI increased slightly to 47.2 in August from an eight-month low of 46.8 in July, though it fell short of the market consensus of 47.5. Following this report, traders raised the likelihood of a more aggressive half-point rate cut to 39%, up from 31%, according to CME Group’s FedWatch tool.
The US JOLTS Job Openings are anticipated to drop to 8.10 million, down from 8.184 million in June. Meanwhile, the US ISM Services PMI is expected to rise slightly to 51.4 in August from 51.1 in July.
Technical Analysis: Gold price maintains a positive outlook in the long term.
Gold prices trade in negative territory for the day, but the precious metal continues to exhibit a bullish trend on the daily chart. This is supported by the price holding above the key 100-day Exponential Moving Average (EMA) and the 14-day Relative Strength Index (RSI) remaining above the midline.
The key upside barrier for gold is in the $2,530-$2,540 range, which aligns with the upper boundary of a five-month-old ascending channel and the all-time high. If the price sustains above this level, it could open the door to the $2,600 psychological mark.
On the downside, immediate support is at $2,470, the low from August 22. A break below this level could trigger a move back toward $2,432, the low from August 15. Further losses could lead to a drop to $2,377, which coincides with the 100-day EMA.
