Gold (XAU/USD) has found support from former range highs and is bouncing ahead of a speech from Fed Chairman Jerome Powell. The speech is expected to impact Fed policy on interest rates, which is a crucial factor for Gold. Technically, XAU/USD has lifted off support and remains in an uptrend, although risks of a near-term reversal have increased. The precious metal’s recovery is aided by a weaker US Dollar and lower US Treasury yields, indicating expectations of future interest rate cuts which are favorable for Gold.
The overall outlook for Gold remains positive as it bounces past the $2,490s, supported by negative US data and hopes for a potential interest rate cut in September. The decline in Gold on Thursday was influenced by a decrease in the probability of a 0.50% rate cut by the Fed, which fell from mid-30% to mid-20% overnight. Mixed data from the Purchasing Manager Survey (PMI) and Jobless Claims, along with cautious remarks from Fed officials, may have contributed to this recalibration.
Technical analysis shows that Gold has corrected back down to the top of its old range before bouncing back up, indicating a short-term bullish trend. The breakout on August 14 has generated an upside target around $2,550, which could be negated if the price falls back inside the range. Gold is currently in a broad uptrend on medium and long-term time frames, supporting an overall bullish outlook for the precious metal.
The S&P Global Composite Purchasing Managers Index (PMI) is a leading indicator of US private-business activity in the manufacturing and services sector, derived from surveys to senior executives. The recent release for August showed a reading of 54.1, slightly above expectations of 53.5. A reading above 50 indicates expansion while below 50 signals decline, impacting the US Dollar. The PMI data, along with other economic indicators, plays a role in determining the direction of Gold prices based on market sentiment.
As Gold continues to react to market developments and economic indicators, the upcoming speech by Fed Chairman Jerome Powell at the central banker symposium in Jackson Hole is anticipated to set the tone for future Fed policy decisions. Investors will be closely monitoring Powell’s remarks for any hints on interest rate cuts, which could have a significant impact on the price of Gold. Despite near-term risks of reversal, Gold’s overall bullish outlook remains supported by macroeconomic factors and technical analysis.
