GOLD PRICE REMAINS SLUGGISH AT FIVE-MONTH LOW AS FIRMER US DOLLAR WEIGHS

August 21, 2023

The Gold Price (XAU/USD) has experienced a sluggish start to the trading week, hovering around $1,890 after declining for four consecutive weeks. This has led to its lowest level since March, as it struggles to gain traction amidst the cautious market sentiment leading up to important data and events this week. The stronger US Dollar has added downside pressure on the XAU/USD, despite technical analysis suggesting a potential bounce in prices.

One factor contributing to the decline in Gold Price is the firmer US Dollar, which has been growing for the past five weeks. The US Dollar Index (DXY) has been supported by upbeat US activity numbers, such as Retail Sales and wage growth, as well as a risk-off mood and higher Treasury bond yields. The hawkish Fed Minutes revealed that policymakers are divided on the timing of an imminent rate hike, but most prefer to focus on battling inflation.

Concerns surrounding China, one of the largest customers for Gold, have also weighed on the Gold Price. The recent bankruptcy filing by Chinese property developer Evergrande has reignited fears about the country’s debt crisis and its impact on the global economy. However, there are hopes that Chinese policymakers will implement stimulus measures to revive the economy and activity numbers.

Looking ahead, the market will closely watch for the August Purchasing Managers Indexes (PMIs) for major economies on Wednesday, as well as the Jackson Hole Symposium where major central bankers will speak about future monetary policies. These events could provide opportunities for the Gold Price to consolidate recent losses.

From a technical analysis perspective, the falling wedge pattern and oversold Relative Strength Index (RSI) signal that a corrective bounce in Gold Price may be imminent. The immediate challenge for the bears is to tackle the wedge’s bottom line at around $1,880 before approaching the horizontal support zone at $1,860. On the upside, a daily closing beyond $1,900 would confirm the bullish chart formation and potentially lead to a target of $1,990.

Overall, the Gold Price is expected to remain in a bearish consolidation, although buyers face several challenges before taking control.