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- Since the start of trading this week the price of gold XAU/USD is on a rebound path upwards.
- It recorded the resistance level of $1938 per ounce, its highest in three weeks.
- The gains came primarily supported by the decline of the US dollar and bond yields.
Investors have been waiting for a series of economic data this week to obtain For more evidence about US interest rate expectations. The price of gold is trying to recover from its sharp losses recently, which reached the support level of $1,885 per ounce. We recommend buying gold again, since the strength of the US dollar is matched by factors that are strong for gold, consisting of increasing global geopolitical tensions and fears of a global economic recession led by China.
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According to this week’s trades, the US dollar gave up some of its recent strong gains, which came as a result of the strong expectations for the future of the American interest rate hike. Accordingly, the price of the US dollar has declined, making gold less expensive for holders of other currencies. Yields on the benchmark 10-year Treasury bond also remained below the recent peak.
The focus this week will be on the US Personal Consumption Expenditure Price Index report scheduled for release tomorrow Thursday and the US non-farm payrolls data for August on Friday for more clarity on the strength of the economy. According to the analysts, “the strong employment and the strong job numbers and wage numbers implicitly indicate continued pressure on wages and possible inflation, which means that the Federal Reserve Bank is likely to keep US interest rates at high levels for a long time.” Accordingly, “the gold price may decline towards the $1,900 level if the data remains very strong, and I believe that the possibilities of the gold price reaching $1,840 is not beyond the realm of possibility.”
For his part, Federal Reserve Bank President Jerome Powell said at an annual meeting in Jackson Hole, Wyoming, last Friday that the Federal Reserve Bank may need to raise US interest rates further to calm inflation, which is still very high. In this regard, the CME FedWatch tool showed that investors expect a 56% chance of raising interest rates again in 2023, and a 40% chance that the Federal Reserve will leave interest rates unchanged for the rest of the year.
Highlighting investor sentiment towards bullion, Friday’s data showed that Comex gold speculators reduced their net long positions in the week ending August 22.
Gold futures recorded modest gains in general. The yellow metal has struggled to regain momentum after reaching a record high last spring, driven by uncertainty surrounding monetary policy and renewed strength in the US currency. In general, gold prices XAU/USD have increased by more than 6.5% since the beginning of the year until now. According to the performance on the daily chart, the bulls may be able to control the performance of the gold price XAU/USD if the prices move more towards the resistance levels of 1945 and 1970 dollars respectively. This may happen quickly if the US jobs numbers this week come in lower than expected.
On the other hand, if the American jobs figures come in stronger than expected and support the policy tightening path of the US Federal Reserve Bank, the price of gold will return to the support of $1900 per ounce again. Market analysts believe that the price of gold will trade in the range of $1950 to $2010 for the remainder of 2023.
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