As the US dollar corrects, the gold price extends its rebound from weekly lows.
The gold price is building on its earlier Friday rally. Aiming to retake the $1,930 round mark. The US Dollar (USD) is seeing a prolonged drop from six-month highs. As US Treasury bond rates fall.
Gold price rises as the US dollar falls and risk aversion rises.
Despite a risk-averse market environment. The US Dollar retracement is gaining steam as traders seek to lock in profits on their USD longs. Ahead of China’s inflation report. The G20 leaders will meet on Saturday. Furthermore, the US Federal Reserve (Fed) begins its ‘blackout period’ on Saturday. Leading markets to reposition ahead of next week’s crucial US Consumer Price Index (CPI) data release.
Traders are still cautious ahead of the Chinese inflation statistics and the G20 Summit on Saturday.
Furthermore, fears about China’s slowing economy, increasing oil costs. And the Fed’s ‘higher-for-longer’ interest rate outlook are all adding to widespread risk aversion. The resurgence of the Chinese yuan has investors on edge. As they await the next step by the country’s officials to arrest the drop.
Meanwhile, the US Dollar and US Treasury bond rates failed to continue the brief rally fueled by solid US job market data on Thursday. Which indicated that Initial Jobless Claims decreased 13,000 to 216,000 in the week ending September 2. The lowest level since August. level since February, and the fourth consecutive weekly drop. This might be because the Nonfarm Productivity for the second quarter was revised lower.
The gold price in US dollars is expected to break its two-week uptrend as it struggles to rebound from one-week lows of $1,915 touched on Wednesday. The end-of-week flows might help the gold price rise again, especially if the US Dollar fall accelerates later in the day.
It’s a data-light week in the US, so risk sentiment and Fedspeak will be essential in determining the next swings in the gold price.
Technical analysis
Technically, the tide appears to have shifted in favor of gold buyers, as the 14-day Relative Strength Index (RSI) has returned to neutral. Above the midline, in bullish territory.
The 50-Daily Moving Average (DMA) at $1,932 represents immediate resistance. A sustained break above that level will need a test of the 100 DMA at $1,951.
Gold buyers will be looking to the static barrier of $1,970 and the July 27 high of $1,982.
On the other hand, gold sellers must establish a firm footing below the junction of the 21 and 200 DMAs at $1,916, below which the initial demand area is indicated at the previous week’s low of $1,904.
The next major downside cushion is seen at $1,900, below which a sell-off toward $1,885 cannot be ruled out.
