Gold prices closed at 1,942.52, after placing a high of 1,973.30 and a low of 1,932.51. Overall, the movement of gold remained bearish throughout the day. After posting gains for three consecutive days, the precious metal reversed, posting losses on Wednesday, and dropping from a near 2-week high, as the dollar rebounded and strong US manufacturing data raised hopes for a swift global economic recovery.

The US Dollar Index jumped by 0.6% on Wednesday, to reach as high as 92.87, from the previous day’s low of 91.7. Despite a super-dovish new Fed policy and tumbling US Treasury yields, the US dollar gained traction in the market, and weighed heavily on the price of the yellow metal.

On the previous day, gold nearly reached the $ 2,000 level, on the back of a decreasing risk sentiment; however, the ISM Manufacturing PMI pulled down the gains in the precious metal, and gold started to fall. The climb in the US stock market reached a record all-time high, dulling gold’s safe-haven appeal and dragging its prices down on Wednesday.

At 17:15 GMT, the ADP Non-Farm Employment Change data for August revealed only 428K jobs, compared to the expected 1,250K jobs, weighing heavily on the US dollar, whereas, at 19:00 GMT, the factory orders in July showed an advance to 6.4%, against the expected 6.0%, boosting the US dollar and weighing on the gold prices.

Meanwhile, on Wednesday, New York Federal Reserve Bank President John Williams said that lower interest rates around the globe have made it more difficult to use monetary policy to stimulate the economy. However, the new framework by the Federal Reserve has put the US Central Bank in a better position to achieve its goals in terms of higher inflation and employment.

The US central bank announced a new strategy last week, to target an average rate of inflation over time. This approach indicates that, in order to reach the average inflation target, higher inflation is desirable, temporarily. Williams also said that the Federal Reserve was focused on shortfalls in employment.

He added that the new strategy puts an end to the previous approach of worrying about inflation; rather, it emphasizes supporting the labor market. He also reiterated that interest rates would remain low for a while. He added that even the matter of rising interest rates was far off in the future.

On the other hand, the President of the Federal Reserve Bank of Cleveland, Loretta Mester, said that the United States’ economic recovery remains fragile, as it requires more government action to prevent long-term scars.

During an online conference hosted by the National Association for Business Economics, Mester said that further financial support was needed to help the households, small businesses, and state and local municipalities, which have been knocked the hardest by the pandemic.

She projected that economic output in 2020 would be somewhat below the level of last year, and that inflation would run below the 2% target, along with unemployment levels within the high single-digit range, by the end of the year.

Despite the dovish comments by Fed members, the US dollar did not lose its demand in the market and continued to weigh on gold prices, as the US stock market posted heavy gains on the day.

Furthermore, the US-China tensions continued to deteriorate after the announcement by US Secretary of State Mike Pompeo, who said that senior US-based Chinese diplomats would need to get permission to visit American universities or meet with local government officials. This move came after the unfair treatment of American diplomats in China. But, despite increased US-China tensions, gold continued to post losses, as investors focused more on the risk sentiment and stock prices than they did on the geopolitical tensions.

On the vaccine front, the US Trump administration said that it would not work with an international cooperative effort to develop and distribute a coronavirus vaccine, because it did not want to be constrained by multilateral groups like the World Health Organization (WHO). This supported the risk sentiment and weighed on gold prices.

Daily Technical Levels

Support Resistance

1,965.00 1,997.00

1,951.10 2,015.10

1,933.00 2,029.00

Pivot point: 1,983.10

The gold prices fell sharply, after violating the support level of 1,958. This level might work as resistance now, and below this, the gold prices could remain bearish until around 1,935. A slight retracement could be seen until the 1,955 level. A choppy session can be expected ahead of NFP news tomorrow, but today, a bullish breakout could lead gold prices towards 1,979, and a bearish breakout could lead the precious metal towards 1,910. Good luck!