XAU/USD extends consolidation phase above $2,500

XAU/USD Current Price: $2,513.31

• Market players are still awaiting inflation updates and potential effects on central bank decisions.
• US CB consumer confidence improved more than expected in August.
• XAU/USD is bullish neutral in the short term, bulls are taking chances on the downside.

Quiet trading extends on Tuesday, with gold trading at around $2,510 a troy ounce. The shiny metal is limited to a tight range during the day as expectations grow for upcoming United States (US) inflation figures due out on Friday. The country is due to release the Price Index for Personal Consumption Expenditures (PCE), the Federal Reserve’s (Fed) favorite gauge of inflation. U.S. price pressures remain above the Fed’s 2 percent target, but far from a four-decade peak in mid-2022.

But it’s not just about lowering inflation. The labor market has finally shown signs of easing, meaning wage risks have eased. Meanwhile, the economy continues to grow at a relatively healthy pace, all of which supports an interest rate cut. Chairman Jerome Powell and aides have spent the past month suggesting a shift in current monetary policy, reinforcing the idea of ​​a new cycle when he spoke at the Jackson Hole Symposium last week. Hopes that the Fed will cut rates in September keep the US dollar under pressure.

Meanwhile, data from the United States (US) beat expectations. The Conference Board’s (CB) consumer confidence index rose to 103.3 in August, while July’s figure was revised upward to 101.9 from 100.3. Furthermore, the Expectations sub-index improved to 82.5, while July’s reading was revised to 81.1, marking the index’s second consecutive month above 80. A reading below the latter usually signals a recession ahead.

XAU/USD Short-Term Technical Outlook

Technically, the risk for XAU/USD remains slated to the upside. The daily chart for the pair shows that it continues to develop above all its moving averages, with the 20 Simple Moving Average (SMA) maintaining its upward slope well above the bullish 100 and 200 SMAs. Technical indicators, meanwhile, have lost their upside but are consolidating near overbought values, unable to suggest a future decline.

In the short term, and according to the 4-hour chart, XAU/USD is neutral to the upside. A flat 20 SMA continues to provide intraday support, while the 100 and 200 SMAs grind north well below the current level. Technical indicators, however, sit just above the median lines with no clear directional strength. The risk of a steeper decline appears limited, but a lack of progress could force some profit-taking and send Gold below the $2,500 mark.

Support levels: 2,508.80 2,496.40 2,485.10

Resistance levels: 2,523.50 2,531.60 2,542.00