The gold price (XAU/USD) remained slightly bought while picking up bids to reverse the previous day’s fall from a one-month high in the early hours of Monday. However, the US Dollar’s decline during the US Labor Day holiday, combined with mixed US-China news, has been supporting the XAU/USD upside around $1,941 recently. It’s worth noting that Friday’s US data prods gold buyers after the metal re-entered the monthly high. Nonetheless, a lack of hawkish tilt in the Federal Reserve (Fed) combines China stimulus to keep bullion purchasers encouraged, especially when technical indicators favor an upward rise.
Gold prices rise as US dollar bulls struggle and China unveils stimulus measures.
The gold price remains on the buyer’s radar as US Dollar buyers appear to be tiring after seven straight weekly rises. The XAU/USD positive bias is strengthened by stimulus efforts from one of the world’s largest gold buyers, China.
Looking back, a negative revision to Q2 US GDP growth and softer PMIs contrasted with positive inflation hints and mainly solid employment data. With this, the US Dollar managed to end the week on a high note for the seventh week in a row, albeit recording its lowest weekly gain since early July.
On Friday, the headline US Nonfarm Payrolls (NFP) increased to 187K in August, compared to 170K projected and 157K preceding (revised), while the Unemployment Rate increased to 3.8%, up from 3.5% in market predictions and previous readings. Furthermore, average hourly earnings fell to 0.2% and 4.3%, respectively, from 0.4% and 4.4% previously. Furthermore, the US ISM Manufacturing PMI delighted US Dollar purchasers with data of 47.6 versus experts’ expectations of 47.0 versus 46.4 previous readings.
Following the release of the report, Loretta J. Mester, President of the Federal Reserve Bank of Cleveland, downplayed the increase in the unemployment rate to 3.8%, claiming that the number “is still low.” Despite recent rebalancing, the policymaker described the US labor market as healthy at a speech in Germany. In terms of inflation, the Fed’s Mester acknowledged progress but warned that it remains elevated.
In contrast, China’s Caixin Manufacturing PMI for August increased to 51.0, compared to 49.3 market predictions and 49.2 previous readings. Similarly, China’s official NBS Manufacturing PMI for August increased to 49.7 from 49.4 predicted and 49.3 previously. However, the Non-Manufacturing PMI was 51.0, compared to 51.5 in previous readings and 51.1 in market estimates.
In addition, China’s central bank, the People’s Bank of China (PBoC), announced a significant reduction in its foreign exchange reserve requirement ratio (FX RRR) to 4% from 6.0%, starting September 15.
Nonetheless, a wave of Chinese banks dropped interest rates on Yuan deposits to relieve the strain from previously announced lower mortgage rates. Among them were ICBC, China Industrial Bank, Agricultural Bank of China, and Bank of China (BoC).
Furthermore, Reuters cited four people familiar with the situation to claim that China is expected to scale up efforts to revitalize the country’s real estate market.
In its most recent assessment, the global rating agency Moody’s decreased its economic growth expectations for China while raising its forecasts for US Gross Domestic Product (GDP), while news about US-China tensions and Beijing’s preparation for further stimulus excite gold dealers.
In the last two weeks, the decrease in the benchmark US 10-year Treasury bond yields has been inversely tied to the gold price. Nonetheless, the major bond coupons soared to their greatest levels since 2007, before falling back to 4.18% in the last two weeks.
Furthermore, despite Friday’s lackluster close, Wall Street benchmarks have recovered in recent days, allowing Gold purchasers to maintain control.
Nonetheless, the US Dollar Index (DXY) managed to establish a seven-week rise and challenged the upside of the XAU/USD.
To keep the reins on the XAU/USD, bulls need further signs about the Fed’s policy turn.
Although the US Dollar’s inability to defend recent gains joins China-inspired confidence to support the Gold Prices rise, traders need more signs to protect XAU/USD buyers as sentiment remains fragile. However, the S&P 500 Futures had recorded minor losses by the time of publication, and equity buyers had also lost some ground in the prior several days.
As a result, gold dealers will be watching this week’s China inflation data and the US ISM Services PMI for clear guidance.
Technical Analysis of the Gold Price
While defending the previous week’s continuous trading above the 50-day and 100-day Exponential Moving Averages (EMAs), Gold Price prods a four-month-old declining resistance line at $1,950.
Nonetheless, positive signals on the Moving Average Convergence and Divergence (MACD) indicator, as well as an enthusiastic Relative Strength Index (RSI) line at 14, keep the XAU/USD hopeful of breaking through the immediate upside barrier.
Following that, the gold price can soon increase to a horizontal resistance area comprised of various levels noted since late May, around $1,985, before attempting to break through the $2,000 round figure.
Meanwhile, a convergence of the 100 and 50 EMAs, most recently near $1,930, provides support for the XAU/USD.
Even if the Gold Price falls below $1,930, a confluence of the 200-EMA and the 61.8% Fibonacci retracement of the bullion’s February-May rise near $1,908, followed by the $1,900 mark, will put the bears to the test before handing over control.
It is also worth mentioning that the previous monthly low of roughly $1,885 serves as a downside filter for the XAU/USD.