Gold prices in terms of the US dollar (XAU/USD) traded in a tight range on Monday, with the upside capped below 10-DMA located at 1138.61 while the downside was cushioned near 1125 levels. Gold prices remained supported amid falling Asian stocks and weaker greenback after Chicago PMI data disappointed markets. The Chicago PMI booked 54.4 in August, compared with the July result of 54.7 points. The upside was capped as traders assessed Sept rate hike possibilities after the Jackson Hole gathering which backed the case for Fed tightening despite the recent high volatility in the financial markets.
XAU/USD extends gains in to a fourth-day and opened the new month on a positive note, as the latest China PMI data refuelled worries over Chinese economic prospects, spooking markets and triggering a wave of renewed risk-off environment, benefitting safe-haven allure of the gold. Further, both the US dollar and the global equities reacted negatively to the news, keeping the risk-off sentiment intact in the market. Traders dumped the US currency weighing the latest set of weak Chinese manufacturing PMI reports and its potential impact on the Fed rate hike decision making process.
Technicals – Faces stiff hurdle at 1146.40 levels
XAU/USD extends its winning streak and finally broke above the crucial resistance zone of 5-DMA and 50-DMA confluence near 1130.50-1132 levels and rallied to fresh four day highs at 1144.28 levels. At the moment, the pair oscillates above the bullish 10-DMA located at 1141.08, gathering pace to storm through the daily highs, beyond which 1146.30/40 region appears to be the next key resistance zone likely to be tested.
The daily RSI around 57 points higher supporting further advances. Markets now await fresh updates from the upcoming US manufacturing reports for further USD moves. The ISM manufacturing PMI eased somewhat in July, but markets expect it will stabilize at 52.8 points in August. In case the data beats expectations, we could see gold prices reverting to the 50-DMA support zone near 1130 levels below which the downside remains exposed to 1124 levels where the upward sloping 20-DMA lie.
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