• Gold bounces alongside improvement in US President Trump’s health. 
  • Developments around Trump’s health to be the key decider.
  • Gold stays below 21-DMA ahead of the US Markit, ISM Services PMIs.

Heading into a new week, the risk sentiment witnessed a major turnaround alongside the apparent improvement in US President Donald Trump’s health condition. The US dollar gave back a minor part of its last Friday’s surge amid the upbeat market mood, as Gold (XAU/USD) showed some signs of life around the $1900 mark. The ongoing optimism over the additional US fiscal stimulus also offered some support to the yieldless gold.  The yellow metal gained over 2% last week, settling Friday below the $1900 level. Friday’s slide was courtesy of the resurgent haven demand for the greenback after Trump and his wife were diagnosed with COVID-19.

Looking ahead, the price action in gold will likely depend on the fresh updates concerning Trump’s health, especially after some of the medical experts noted that the president’s condition may be more severe, given fluctuating oxygen levels and a steroid drug treatment. The safe-haven dollar could regain poise and knockdown gold should Trump’s condition deteriorate. In contrast, gold could extend the bounce in case of early discharge from the hospital. Also, of note remains the US Services PMI reports from both Markit and ISM for fresh trading impetus ahead of Wednesday’s FOMC September meeting minutes.

Gold: Short-tern technical outlook

Daily chart

fxsoriginalAs observed in the daily chart, gold’s upside attempts likely to remain capped while it trades below the 21-day Simple Moving Average (DMA) at $1915.

Meanwhile, to the downside, the upward-sloping 100-DMA at $1856 could continue to offer support, leaving the prices in a narrow range.

A breakout on either side could trigger a substantial move, although the path of least resistance appears to the downside amid a bearish 14-day Relative Strength Index (RSI), currently at 44.86.

 

 

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