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Gold price remains below $2,500 as traders move to the sidelines ahead of Powell's speech

Most recent article: Gold bounces off support ahead of Powell's Jackson Hole speech

  • Gold price regains positive traction on Friday, albeit lacks follow-through and remains below $2,500. 
  • Dovish Fed expectations prompt fresh USD selling, which, along with geopolitical risks, lend support.
  • The upside seems capped as traders keenly await Fed Chair Jerome Powell’s speech for rate-cut cues. 

Gold price (XAU/USD) attracts some dip-buying on the last day of the week and reverses a part of Thurdsay's slide of over 1% to the weekly low. The US Dollar (USD) struggles to capitalize on the overnight bounce from the YTD low amid the prospects for lower interest rates in the US. The dovish outlook triggers a fresh leg down in the US Treasury bond yields and exerts some pressure on the Greenback. Apart from this, geopolitical risks lend support to the safe-haven precious metal. 

Traders, however, seem reluctant to place aggressive bullish bets ahead of the Fed Chair Jerome Powell's speech at the Jackson Hole Symposium later this Friday. This keeps the Gold price below the $2,500 psychological mark heading into the European session. Powell's comments will be scrutinized for more cues about the Fed's rate-cut path, which, in turn, will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the non-yielding yellow metal. 

Daily Digest Market Movers: Gold price bulls await Powell's speech before placing fresh bets

  • The US Dollar staged a goodish bounce from the 2024 low touched the previous day amid rebounding US Treasury bond yields and drove flows away from the Gold price on Thursday. 
  • The attempted USD recovery lacks follow-through in the wake of bets for an imminent start of the Federal Reserve's rate-cutting cycle in September, which helps limit losses for the XAU/USD. 
  • On the economic data front, the US Department of Labor (DoL) reported that Initial Jobless Claims rose to a seasonally adjusted 232,000 in the week ending August 17, up from the 228K previous.
  • This follows the annual benchmark review of employment data released on Wednesday, which showed that US employers added 818,000 fewer jobs than reported during the year through March. 
  • Moreover, the minutes of the July 30-31 FOMC meeting revealed that an increasing number of policymakers backed the case for a rate cut next month amid progress in bringing down inflation. 
  • The S&P Global flash PMI indicated that business activity in the US manufacturing sector shrank at the fastest pace this year, while the gauge for the services sector unexpectedly ticked higher. 
  • The composite PMI showed that the business activity in the US private sector continued to expand at a healthy pace and a fall in selling price inflation to a level close to the pre-pandemic average.
  • Kansas City Fed President Jeffrey Schmid said that there is still work to do on sustainably getting inflation back to 2% and that he needs to see more data before supporting the decision to reduce rates.
  • Philadelphia Fed President Patrick Harker said that jobs market revisions weren't a surprise and that he was on board with a September interest rate cut as long as the data performs as expected.
  • Separately, Boston Fed President Susan Collins said that it will soon be appropriate to begin cutting rates as data on inflation are consistent with more confidence inflation getting back to 2%.
  • The market attention now shifts to Fed Chair Jerome Powell's speech, which will be scrutinized for cues about the interest rate trajectory and provide a fresh directional impetus to the yellow metal.

Technical Analysis: Gold price technical setup supports prospects for further appreciating move

From a technical perspective, the overnight downfall stalled near the $2,370 horizontal resistance breakpoint, now turned support, which should now act as a key pivotal point. A convincing break below might prompt some technical selling and drag the Gold price towards the next relevant support near the $2,345-2,343 region. The corrective decline could extend further towards the 50-day Simple Moving Average (SMA), currently pegged just above the $2,400 round figure.

On the flip side, momentum back above the $2,500 mark now seems to confront some resistance near the $2,513-2,514 area. This is followed by the record high, around the $2,531-2,532 region, which if cleared will be seen as a fresh trigger for bullish traders and set the stage for an extension of the Gold price's recent well-established uptrend.

Economic Indicator

Fed's Chair Powell speech

Jerome H. Powell took office as a member of the Board of Governors of the Federal Reserve System on May 25, 2012, to fill an unexpired term. On November 2, 2017, President Donald Trump nominated Powell to serve as the next Chairman of the Federal Reserve. Powell assumed office as Chair on February 5, 2018.

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Next release: Fri Aug 23, 2024 14:00

Frequency: Irregular

Consensus: -

Previous: -

Source: Federal Reserve

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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