Good morning traders,

Prices for the yellow metal GOLD closed at 1,956.31, after placing a high of 1,962.45 and a low of 1,936.98. Overall the movement of gold remained bullish throughout the day. Gold prices edged higher on Monday, on the back of the weak US Dollar, and expectations that the US Federal Reserve will repeat its dovish monetary policy stance this week. Gold stood firm due to the assumption that the Federal Reserve could adopt a further dovish message concerning average inflation targeting.

The Federal Monetary Policy meeting is due to be held on Wednesday this week, and the US dollar has come under selling pressure ahead of it, providing strength to gold prices on Monday. The US Dollar Index fell by 0.3% on Monday, weighing on the US dollar, and helping gold to gain at the same time. The two-day monetary policy meeting of the Federal Reserve Open Market Committee for September will begin on Tuesday, with Chairman Jerome Powell wrapping up the event with a news conference on Wednesday.

The interest rates from the United States Fed are unlikely to change, with the central bank looking comfortable with its zero to 0.25% rate. Jerome Powell’s speech is the focus of attention by market traders, as he will highlight the Fed’s mission of higher inflation for longer.

If the Fed was able to at least signal more easing, by amending its framework to allow for an inflation overshoot, the US dollar would see significant selling pressure, and we would see further gains in gold. Market participants are also waiting for the policy decisions by the Bank of Japan and the Bank of England, which are due on Thursday. Furthermore, investors took took stock of the uncertainty surrounding the UK’s Brexit deal, as Prime Minister Boris Johnson’s plan to break parts of the treaty was subjected to a vote in parliament on Monday. Ahead of these votes, the uncertainty in market sentiment increased, lending support to the gold prices.

Apart from this, the gains in the GOLD prices were capped by the resumed hopes of economic recovery, on the back of increased optimism in terms of a potential vaccine against COVID-19. On Monday, trials were resumed on the long-awaited potential vaccine developed by AstraZeneca Plc, for which the Phase 3 trials were halted, due to an unexplained illness in one of the participants. This gave global stock markets a boost, and improved the risk sentiment in the market, limiting any further gains in gold prices.

Meanwhile, the gold prices were also supported by the renewed hopes of new US stimulus measures, as the House of Representatives has returned from its summer recess, and chances for a relief bill being agreed upon before the election have increased. It seems like the wait for Congress to finally approve a fifth coronavirus aid package and potential stimulus checks is finally over. However, the uncertainty remains, and the gold prices are gaining as a result. Another factor involved in the upward trend of gold prices was a report showing that the World Health Organization (WHO) has recorded a record one-day rise in the number of new coronavirus infection, with reports of 307,930 new cases within 24 hours.

Daily Technical Levels

Support              Resistance

1,970.64             1,975.84

1,967.87             1,978.27

1,965.44             1,981.04

Pivot Point:       1,973.07

Trading in the precious metal GOLD was sharply bullish, at the 1,968 level, on the back of the weaker US dollar. On the higher side, bullish trading in gold may continue until the 1,985 and 1,994 resistance levels. On the lower side, the XAU/USD may find support at the 1,963 and 1,955 levels. Overall, the trading bias seems bullish. Good luck!