Market Analysis

Gold prices hover at daily low as the USD strengthens slightly and the market is cautious

Amos Simanungkalit · 09 Sep 2024146.1K Views

Gold prices (XAU/USD) continue to face selling pressure for the second consecutive day on Monday, hovering below the $2,500 psychological threshold during the early European session. The mixed US jobs data released on Friday has reduced the likelihood of a more significant 50 basis point rate cut by the Federal Reserve (Fed). This has prompted a modest recovery in US Treasury yields, which in turn bolsters the US Dollar (USD) as it recovers from a one-week low, diverting investment away from the non-yielding precious metal.

At the same time, the underwhelming US Nonfarm Payrolls (NFP) report stirs concerns about a potential downturn in the US economy, which could offer some support to gold prices. Additionally, the lack of progress in ceasefire talks between Israel and Hamas dampens investor appetite for riskier assets, helping to limit gold’s downside. Given these factors, it’s prudent to wait for more decisive selling before anticipating a further extension of Friday's pullback from the recent all-time high.

Technical Outlook: Gold needs to break $2,470 support for bears to gain control
From a technical standpoint, gold has been trading within a familiar range for the past three weeks, forming a rectangle pattern on short-term charts, which reflects trader indecision regarding the next directional move. This range-bound movement can still be seen as a bullish consolidation phase, especially following the strong rally to record highs. Moreover, daily chart oscillators, while losing momentum, remain in positive territory. As a result, any further decline might be viewed as a buying opportunity near the $2,471-$2,470 horizontal support zone.

This support level is critical, marking the lower boundary of the current trading range. A decisive break below it could trigger technical selling, exposing gold to further declines toward the 50-day Simple Moving Average (SMA), currently located near the $2,443-$2,442 area. A continued downtrend could lead prices toward the $2,400 level, with additional support at the 100-day SMA around the $2,390-$2,389 region. Conversely, an upward move would face strong resistance around $2,520, followed by the $2,530-$2,532 area, near the all-time high. Sustained buying beyond these levels could encourage further gains in the near term.