Gold Price Analysis: XAU/USD bulls retake controls by crossing $1,950

• Gold prices stay firmer after snapping three-day losing streak the previous day.
• US dollar weakens ahead of Fed Chair Powell’s speech in Jackson Hole Symposium.
• Chatters concerning Average Inflation Targeting (AIT) gain attention.
• Sino-American tussle renews over the South China Sea issue.

Gold regains $1,950, currently around $1,954, at the start of Thursday’s Asian session. The yellow metal differed from the previous three-day losses while closing at the highest since August 19. The US dollar weakness could be considered as the main driver for the latest run-up. Though, worsening coronavirus (COVID-19) conditions in Europe, speculations of smaller US stimulus and cautious sentiment ahead of US Federal Reserve (Fed) Chair Jerome Powell’s speech in the Jackson Hole Symposium are extra points to count.

Risk-on abated?

Wall Street keeps cheering hopes of further stimulus and the US 10-year Treasury yields are up too, near 0.688% by the end of Wednesday’s North American session. However, the US dollar declines and the rush to gold suggests something fishy in the market sentiment amid mixed news.

The reason could be traced from the rumors that the Fed boss Powell could sing a bearish song at the key speech while indicating AIT and growth prospects to tease the September meeting results. “An average inflation target would mean that the Fed would be willing to tolerate an overshoot in inflation to make up for an undershoot that had occurred over a certain (limited) period of time. In the current environment, this would anchor inflation expectations, lower real interest rates, and lead to policy being expansionary for longer than otherwise,” said the Australia and New Zealand Banking Group (ANZ).

Also on the US dollar negative side is the news, shared by the CNBC, which indicates the Republicans are considering a more narrow coronavirus relief bill as aid talks between the Trump administration and Democrats are at a deadlock.

Further, the highest COVID-19 new cases in Italy since May and the fresh US-China tussle over the South China Sea offers additional reasons for markets to rethink on the previous optimism.

Even so, stabilizing virus cases in Australia, China, the US and Japan join no major challenges to the phase-one deal to favor the risk-on mood.

As a result, traders will be extra cautious and might want to rush for risk-safety ahead of the key US session comprising preliminary readings of the US second quarter (Q2) GDP, expected -32.5% versus -32.9%, as well as Powell’s speech in a satellite call to Wyoming.

Technical analysis

The metal’s sustained bounce off an ascending trend line from June 05, currently around $1,906, keeps the buyers hopeful. As a result, a monthly falling trend line near $1,958 could become their immediate choice to break ahead of a 21-day SMA level of $1,971.