Gold Price Forecast: XAU/USD retreats from highs, retains the $2,500 mark

XAU/USD Current price: $2,510.25

• The US ISM Services PMI showed upbeat output in the sector in August.
• A weaker United States labor market fueled speculation of a larger interest rate cut.
• XAU/USD loses near-term bullish strength but holds above $2,500.

Spot Gold peaked at $2,523.45 a troy ounce on Wednesday, advancing the most during European trading hours, as the US Dollar fell in anticipation to the release of first-tier United States (US) data.

On the one hand, the country published employment-related figures that confirmed a weaker labor market and, hence, fueled hopes for a larger Federal Reserve (Fed) rate cut this month. On the other, growth-related data indicated that the economy remains resilient despite record rates and somehow cooled down markets.

The US published the ADP Employment Change report, which showed the private sector added 99,000 new job positions in August, well below the 145,000 anticipated. Also,  the Challenger Job Cuts report showed that layoffs in August soared to 75,891, the highest monthly reading in fifteen years,  while year-to-date hiring reached a historic low. Finally, Initial Jobless Claims in the week ended August 30 hit 227K, below the 230K expected and the previous 232K.

The data initially weighed on the US Dollar, which later recovered following the release of the August ISM Services Purchasing Manager Index (PMI), as services output grew by more than anticipated. The index hit 51.5 vs the 51.4 posted in July and the 51.1 anticipated.

Wall Street started the day with a positive footing but quickly changed course. US indexes are trading mixed, with only the Nasdaq Composite holding in the green. Finally, US Treasury yields remain subdued, with the 10-year and the 2-year note yielding roughly 3.74% each.

The market focus now shifts towards the main US employment release, the Nonfarm Payrolls (NFP) report. The country is expected to have added 160K new positions in August, while the Unemployment Rate is foreseen at 4.2%, easing from the previous 4.3%. The forecast may suffer last-minute reviews from market analysts after the tepid figures recently released.

XAU/USD short-term technical outlook  

XAU/USD retreated from the mentioned high and currently hovers around $2,510. From a technical point of view, the daily chart shows it found buyers near a bullish 20 Simple Moving Average (SMA), which heads firmly north at around $2,493.60. The longer moving averages, in the meantime, keep advancing far below the current level. Finally, technical indicators remain within positive levels, although only the Relative Strength Index (RSI) indicator advances, limiting the bullish scope for XAU/USD.

In the near term, and according to the 4-hour chart,  the risk is skewed to the upside, although the momentum receded. Technical indicators have retreated from their intraday peaks before stabilizing within positive levels. At the same time, the 20 and 100 SMAs converge around $2,498.00, offering modest upward slopes. For the most, the bright metal is expected to enter a consolidative phase ahead of the US NFP report.

Support levels: 2,498.00 2,489.60 2,475.70  

Resistance levels: 2,519.75 2,531.60 2,545.00