Quick overview

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XAU/USD remains in a bid tone; however, the fundamental environment calls for bulls to exercise caution before setting up for further gains. Despite the increasing consensus that the Federal Reserve (Fed) will resume its rate-cutting cycle in September, the US Dollar (USD) is unable to capitalize on the day’s gains.

The safe-haven precious metal benefits from this, as well as a minor decline in the global risk sentiment.

Bulls looking to position themselves for potential short-term appreciation should exercise caution, especially if the 4-hour or daily charts show slightly negative technical indicators. An upward movement is likely to encounter strong resistance near the 200-period Simple Moving Average (SMA) on the 4-hour chart, currently situated in the $3,347 to $3,348 range. The next level of interest is the overnight swing high, which is approximately $3,358. If the XAU/USD pair surpasses this level, it may rise to the $3,372 to $3,374 region. Should momentum continue, the gold price could recover to the $3,400 mark before attempting to test the monthly peak, located in the $3,408 to $3,410 range.

The US dollar reached its highest level in over a week, while gold dropped to a 3-week low.

This movement occurred as traders continued to dismiss the likelihood of a significant interest rate cut by the Federal Reserve in September. This shift followed the release of the US Producer Price Index last Thursday, which indicated a rise in price pressures, showing the fastest monthly increase since 2022

This week, diplomatic efforts to resolve the long-running conflict between Russia and Ukraine have intensified, seemingly weakening the demand for safe-haven currencies. Preparations are underway for a bilateral meeting between Ukrainian President Volodymyr Zelensky and Russian President Vladimir Putin, as reported by White House press secretary Karoline Leavitt on Tuesday. Additionally, Zelensky, along with EU and UK leaders, was previously invited to speak with US President Donald Trump.

Later today, the Federal Reserve will release the minutes from its July policy meeting. The speech by Fed Chair Jerome Powell at the Jackson Hole Symposium may offer further insights into the central bank’s policy position.

The FedWatch Tool from the CME Group indicates that traders are pricing in a higher likelihood that the Fed will begin its rate-cutting cycle in September and reduce borrowing costs by 25 basis points twice by the end of the year. Trump, meanwhile, called on the Fed to immediately cut borrowing costs and again chastised Powell on Tuesday for being too late in reducing rates. Trump asserted that the housing market was now at risk due to Powell’s reluctance to lower rates.