Gold price extends slide below $2,500 as US dollar recovers

• The price of gold is trading in negative territory for the third consecutive day in the first Asian session on Tuesday.
• US Fed rate hike cuts bets and geopolitical risks could help limit gold’s losses.
• Investors await August US ISM PMI for further impetus.

The price of gold (XAU/USD) is losing ground amid a stronger US dollar (USD) and higher US Treasury yields on Tuesday. However, anticipation that the US Federal Reserve (Fed) will cut interest rates in September could support the price of precious metals, as lower interest rates reduce the opportunity cost of holding gold without yield. In addition, geopolitical tensions unfolding in the Middle East could boost safe-haven assets such as gold.

Looking ahead, the Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) will be released on Tuesday. The highlight for this week will be US non-farm payrolls for August, which could determine the pace of interest rate cuts by the Fed and influence gold prices in the near term.

Daily Digest Market Movers: Gold price faces selling pressure amid USD rally

• Protests erupted in Israel on Monday with renewed anger over the government’s failure to secure a hostage ceasefire deal with Hamas, according to CNN. The movement is fueled by the killing in Gaza of six hostages, whose bodies were recovered by Israeli soldiers this weekend.
• China’s Caixin Manufacturing PMI rose to 50.4 in August from 49.8 in July, above the market consensus of 50.0.
• US ISM manufacturing PMI for August is expected to improve to 47.5 in August from 46.8 in July, while services PMI is expected to decline to 51.1 in August from 51.4 previously .
• The US economy is expected to add 163,000 jobs in August. The unemployment rate is expected to fall to 4.2%.
• Markets are now pricing in a nearly 69% chance of a 25 basis point (bps) rate cut by the Fed in September, while the chance of a 50bps cut is 31%, according to CME’s FedWatch tool.

Technical Analysis: Gold price maintains long-term positive momentum

The price of gold falls on this day. According to the daily chart, the precious metal’s constructive outlook prevails as the price is well above the 100-day exponential moving average (EMA). The upward momentum is reinforced by the 14-day Relative Strength Index (RSI), which is above the median line around 55.70, suggesting that the rally is more likely to resume than reverse.

The key resistance level for XAU/USD appears in the $2,530-$2,540 area, showing the upper limit of the five-month-old ascending channel and the all-time high. A decisive break above said level could lead to a rise to the psychological level of $2,600.

On the other hand, the August 22 low at $2,470 acts as an initial support level for the yellow metal. A break below this level could drag the price further south to $2,432, the August 15 low. The next level of contention to watch is $2,372, the 100-day EMA.