Gold Price Forecast: XAU/USD set to range between two key moving averages ahead of US jobs data

Gold price is trading around a flatline, defending the $1,900 mark early Monday, as the dust settles after Friday’s volatile trading. The United States Dollar (USD) is correcting US Federal Reserve Chairman Jerome Powell’s hawkish remarks-led rally to 12-week highs seen on Friday.  

China optimism checks the US Dollar rally, helps Gold price

During the highly-anticipated speech at the Jackson Hole Symposium on Friday, Fed Chair Jerome Powell struck a relatively hawkish tone, leaving doors open for one more rate hike in the final quarter of this year. Jerome Powell said on Friday that Fed policymakers would "proceed carefully as we decide whether to tighten further," but also clarified that the central bank has not yet concluded that its benchmark interest rate is restrictive enough to ensure that inflation returns to the 2.0% target.

Amidst a resilient United States economy, justified by the recent series of encouraging macro data, Jerome Powell strengthened the central bank’s narrative of higher interest rates for a longer period of time. Powell’s hawkish stance triggered a fresh rally in the US Dollar alongside the US Treasury bond yields, smashing Gold price toward the $1,900 threshold. However, a late rebound in the US stocks helped curb the US Dollar upsurge, lifting Gold price from two-day lows of $1,904. Gold price posted the best week in six.

So far this Monday’s trading, the US Dollar is on a retreat amid a pause in the US Treasury bond yields rally, as investors weigh the Fed’s higher-for-longer rate view heading toward the key US employment data releases this week.  With inflation cooling, the US labor market report will be key to confirm whether the Fed will remain on track for one more rate hike, either in November or December.

According to the CME Group’s FedWatch tool, markets expect an 80% chance of a Fed pause next month but the probability of a 25 basis point (bps) hike in November is now at 48% versus 33% a week earlier. Following Powell’s speech last Friday, the odds for a November Fed rate hike spiked up to roughly 57%.

The renewed optimism surrounding China has lifted risk sentiment, collaborating with the corrective downside in the US Dollar In early Monday’s trading. Asian shares rallied as China announced new measures to support its ailing markets, including halving the stamp duty on stock trading. China's securities regulator also approved the launch of 37 retail funds over the weekend, part of government efforts to revive the stock market.

Looking ahead, risk trends will likely emerge as the key driver behind the Gold price action, in the absence of top-tier US economic data. The Summer Bank holiday in the UK could leave Gold price subject to volatility while within a familiar range.

Gold price technical analysis: Daily chart

Gold price played out well to the downside, as predicted here on Friday, although managed to settle the week above the critical 200-Daily Moving Average (DMA) at $1,911.

Gold price continues to face stiff resistance at the 21 DMA of $1,917, limiting buyers. This could be justified by a bearish 14-day Relative Strength Index (RSI) indicator, which remains listless below the midline.

So long as the 21 DMA hurdle checks the upside, Gold price remains poised to threaten the 200 DMA yet again. A daily closing is needed either above the 21- or 200-DMA to validate a range breakout.

With RSI, however, below the 50 level (as mentioned above), Gold sellers continue to target the multi-month lows of $1,885.

Alternatively, daily closing above the 21 DMA could revive the recovery from five-month lows. Gold buyers would aim for the 50 DMA resistance at $1,930 once again.

If Gold buyers manage to find acceptance above the latter, the $1,950 psychological barrier would be challenged.