Gold Price Forecast: XAU/USD remains stuck between two key levels, eyes private US data

Gold retests the $4,000 market as safe-haven flows pick up early Monday.
US Dollar pauses its winning streak as traders look to key private US data as the government shutdown prolongs.
Gold buyers stay hopeful as long as the daily RSI defends the 50 level, while the 38.2% Fibonacci support holds.

Dhwani Mehta FXStreet

Gold has reverted to the $4,000 threshold in Asian trades on Monday, but buyers trade with caution, awaiting the private data releases from the United States (US). The US ISM Manufacturing PMI is due later in the day.

Gold appears ‘buy-on-dips’ trade as a new week kicks in

Safe-haven flows return at the start of the week on Monday, as investors fret over the economic impact of the prolonged US government shutdown, which is set to become the longest on record.

Further, weak Chinese private Manufacturing PMI data and renewed US-China trade risks weigh on sentiment. The RatingDog China General Manufacturing PMI, compiled by S&P Global, declined to 50.6 in October from the six-month high of 51.2 in September, missing markets’ expectations of 50.9.

Meanwhile, US President Donald Trump came out on the wires and noted that he plans to block China from obtaining Nvidia’s most advanced semiconductor technology, per CBS News.

His comments could refuel US-China trade tensions that were eased last week following the meeting between Trump and Chinese President Xi Jinping last Thursday on the sidelines of the APEC Summit in South Korea.

The prevalent risk-averse market environment injects life into the traditional store of value, Gold, after it continued its previous downside in the early hours.

Additionally, a pause in the US Dollar’s winning streak helps Gold stage a decent comeback.

Later in the day, Gold traders will closely monitor the US ISM Manufacturing PMI data, in the absence of any official publication of statistics, for fresh hints on the health of the American economy, especially after the cautious interest rate cut by the US Federal Reserve (Fed) last week.

Markets are now pricing in a 69% probability of a 25 bps Fed rate cut in December compared with a 91.7% chance a week ago, the CME Group's FedWatch tool shows.

That being said, the US-China trade headlines and speeches from Fed officials will also be eyed for any impact on risk sentiment, eventually affecting the safe-haven Gold.

Gold price technical analysis: Daily chart

The daily chart shows that Gold price is flirting with the $4,000 barrier, after having closed the week above it on Friday.

Adding credence to the upside bias, the 14-day Relative Strength Index (RSI) stays bullish, while sitting just above the 50 level.

If the renewed upside extends, buyers will target the $4,050 psychological level, followed by the 21-day Simple Moving Average (SMA) at $4,082

The next critical resistance is aligned at $4,129 – the 23.6% Fibonacci Retracement level of the parabolic rise to the record high that began on August 19.

Conversely, the immediate support is seen at the 38.2% Fibo level at $3,973, below which a test of the 50% Fibo of $3,847 will be inevitable.

Thereafter, the 50-day SMA at $3,833 will come to the rescue of buyers. A sustained break below the latter will put the $3,800 level at risk.

Economic Indicator

ISM Manufacturing PMI

The Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging business activity in the US manufacturing sector. The indicator is obtained from a survey of manufacturing supply executives based on information they have collected within their respective organizations. Survey responses reflect the change, if any, in the current month compared to the previous month. A reading above 50 indicates that the manufacturing economy is generally expanding, a bullish sign for the US Dollar (USD). A reading below 50 signals that factory activity is generally declining, which is seen as bearish for USD.

Why it matters to traders?

The Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers Index (PMI) provides a reliable outlook on the state of the US manufacturing sector. A reading above 50 suggests that the business activity expanded during the survey period and vice versa. PMIs are considered to be leading indicators and could signal a shift in the economic cycle. Stronger-than-expected prints usually have a positive impact on the USD. In addition to the headline PMI, the Employment Index and the Prices Paid Index numbers are watched closely as they shine a light on the labour market and inflation.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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