Gold Price Analysis: Navigating Challenges Amidst Economic Data and Central Bank Moves

Arslan Butt•Monday, August 21, 2023•2 min read

GOLD price grapples with breaking a streak of losses as it hovers around $1,890 per troy ounce during Monday’s Asian session. This precious metal’s trajectory is also influenced by a weakening US Dollar (USD), driven by declining US Treasury yields and a prevailing sense of risk aversion.

Nevertheless, GOLD faced downward pressure on Friday due to encouraging United States (US) economic data, fostering cautious market sentiment as traders remain attentive for more signals on the inflation outlook. The yellow metal’s path forward could also encounter obstacles due to China’s economic troubles. These variables possess the potential to impact the broader trend in Gold prices.

Investors are diligently searching for additional indicators that could shed light on the forthcoming direction of the US Federal Reserve (Fed) in September’s meeting. This cautious approach continues to pervade the market, resulting in lingering uncertainty for traders.

In an unexpected move, the People’s Bank of China (PBoC) implemented a 10 basis points (bps) reduction in interest rates, deviating from market expectations of a 15 bps cut on Monday. This decision from the PBOC could significantly influence investor sentiment and have wider implications for China’s economic landscape. Despite cautious maneuvers by Chinese policymakers, the market is anticipating more rate reductions and broader measures to stimulate the economy in the coming months. This potential scenario might lend support to Gold’s price, which is already under pressure.

The US Dollar Index (DXY), gauging the Greenback’s performance against major currencies, maintains its position around 103.40. The US Dollar (USD) appears to be moving laterally despite robust US data, fostering a cautious stance in the market as it searches for clearer signals regarding the inflation scenario.

In the upcoming week, market participants will closely monitor the release of US economic data, particularly Home Sales and preliminary S&P Global PMI surveys for August. Additionally, Fed Chair Jerome Powell’s speech during the Jackson Hole Symposium on Friday will be closely observed for insights into the state of the US economy. These events hold the potential to shape strategies and influence positions in Gold.

Technical Analysis of Gold Price

Despite being at its lowest point since mid-March, a falling wedge bullish chart formation coincides with the oversold conditions of the Relative Strength Index (RSI) line, positioned at 14. This alignment suggests a potential for bottom-picking in the XAU/USD, indicating a corrective rebound in prices.

As a result, the lower boundary of the mentioned wedge around $1,880 emerges as an immediate challenge for bearish Gold movements, preceding the horizontal support area established over the past 6.5 months at approximately $1,860.

On the contrary, validation of the bullish chart formation necessitates a daily close above the $1,900 threshold, suggesting a theoretical target of $1,990.

Nonetheless, the 200-day moving average (DMA) and 50-DMA, located at approximately $1,907 and $1,935 respectively, will serve as supplementary upside filters for GOLD buyers to surpass prior to reaching the $1,990 mark.

It’s important to acknowledge that a descending resistance line from early May, near $1,955, remains a final hurdle for the XAU/USD.

In summary, the Gold Price is likely to undergo a period of bearish consolidation, yet prospective buyers face a challenging journey ahead before asserting control.

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ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.

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Gold Price Analysis: Navigating Challenges Amidst Economic Data and Central Bank Moves

Technical Analysis of Gold Price

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Gold Price Analysis: Navigating Challenges Amidst Economic Data and Central Bank Moves

Technical Analysis of Gold Price

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