Gold prices fell slightly during a quiet North American session as US markets were closed for Labor Day. This dip in prices came as the Greenback remained strong, with traders awaiting upcoming US economic reports that could impact the Federal Reserve’s decision on September’s rate cut. The XAU/USD was trading at $2,499, down by 0.14%.
The US economic calendar for the week includes the release of several key reports such as the ISM PMIs, JOLTS job openings, ADP Employment Change, and Nonfarm Payrolls. Federal Reserve Chair Jerome Powell, speaking at Jackson Hole, emphasized that inflation risks are easing while employment risks are increasing. This has raised concerns about a potential recession in the future.
Despite last week’s solid US data, which showed positive trends in areas such as Initial Jobless Claims and Retail Sales, fears of a recession have resurfaced due to rising Unemployment Rates in recent NFP reports. This has led to investors buying the US Dollar, resulting in a drop in Gold prices.
Geopolitical tensions remain a concern as US President Biden is expected to propose a ceasefire deal between Israel and Hamas, which could have an impact on the markets. The Chicago Board of Trade (CBOT) fed funds future rates contract suggests that investors are anticipating a significant amount of Fed easing this year.
Looking at the technical outlook for Gold prices, although the RSI indicates a bullish trend, momentum has shifted negatively. If XAU/USD drops below $2,500, it could find support at the August 22 low of $2,470, with further support at the 50-day SMA around $2,424-$2,431. On the other hand, if prices remain above $2,500, the next resistance levels to watch are at $2,550 and $2,600.
The Federal Reserve plays a significant role in shaping monetary policy in the US, with the goal of achieving price stability and fostering full employment. The Fed adjusts interest rates to meet these objectives, with higher rates being used to combat inflation and lower rates to stimulate economic growth. In cases of extreme circumstances, the Fed may implement Quantitative Easing (QE) to increase credit flow in the financial system, weakening the US Dollar in the process.
The Fed holds regular policy meetings where decisions are made on monetary policy, influenced by economic conditions and indicators. Quantitative tightening (QT) is the reverse of QE, with the Fed reducing its bond purchases, which can have a positive impact on the value of the US Dollar. Overall, the upcoming US economic reports and geopolitical developments will continue to influence Gold prices and the broader financial markets in the coming days.
