On Friday, August 30th, the price of gold fell by 0.9%, closing at $2503.03 per ounce. Friday's U.S. inflation data met expectations, boosting the dollar and U.S. bond yields, but due to the possibility of a rate cut by the Federal Reserve in September, gold still recorded a monthly gain.
Friday's data showed that in July, U.S. personal consumption expenditure (PCE) price index rose by 0.2% compared to the previous month, in line with expectations, confirming a 0.1% increase in June. The July PCE price index increased by 2.5% year-on-year, unchanged from June. After a 0.3% increase in consumer spending in June, it rose by 0.5% in July. Following the data release, according to the CME FedWatch tool, traders slightly increased their bets on a 25 basis point rate cut by the Federal Reserve next month to 69%, while the possibility of a 50 basis point cut decreased to 31%. The stable performance of inflation data has somewhat boosted the dollar and U.S. bond yields, leading to a slight rebound. However, gold still recorded the second consecutive monthly rally and remained above the $2500 high level, showing that gold bulls are still holding on. Alex Ebkarian, Chief Operating Officer of Allegiance Gold, said that the PCE data confirms that inflation is no longer the focus of the Federal Reserve, as they have shifted their focus to unemployment issues. The changes in the unemployment rate will directly impact whether the rate cut will happen in September. Therefore, the non-farm payroll data to be released this Friday will be highly anticipated by the market. Despite gold trading near historic highs, traders are becoming cautious and hesitant to chase further gains. Better-than-expected data may restrain investors from aggressively pricing in Fed easing policies and could lead to a strong rebound in the dollar, thereby putting pressure on gold. On the other hand, a second consecutive weak non-farm payroll report may open the door for another downward trend in U.S. bond yields and the dollar, potentially pushing gold to new highs.
Source: E-huitong
On a technical level, the relative strength index (RSI) on the daily chart remains near 60, and the price of gold continues to trade in the upper half of the upward channel since mid-February. However, the MACD technical indicator seems to be showing signs of a bearish crossover, indicating the risk of a high-level corrective decline in gold. The short-term support for gold is located in the $2500-2490 per ounce range (psychological level, midpoint of the ascending channel). The next support is at $2475 per ounce, where the 20-day simple moving average (SMA) is located. If the daily closing price of gold falls below $2475 per ounce, it may open the door to further declines towards $2420 per ounce (50-day moving average). On the upside, a static resistance level seems to have formed around $2530 per ounce. Once the price of gold rises above this level and confirms it as support, it may target the upper limit of the upward channel at $2600 per ounce.
Wang Gang, Bank of China Guangdong Branch
For personal views only, not representative of the views of the organization.